Pakistani Economy Extremely Unstable, says IMF Reports

The International Monetary Fund (IMF) expressed concerns about the Pakistani economy, stating that downside risks remain exceptionally high. The IMF's staff report on Pakistan highlighted the need for discussions on a new program, as political uncertainty and high living costs could impact policy decisions. The report emphasized the importance of adhering to policies outlined in the standby arrangement (SBA) and warned that policy slippages, coupled with reduced external financing, could jeopardize debt sustainability and put pressure on the exchange rate.

Furthermore, the IMF noted that external stability could be negatively affected by higher commodity prices, shipping disruptions, or tighter global financial conditions. Timely disbursements of post-program external financing were highlighted as crucial by the IMF.

Despite completing a short-term $3 billion program last month, Pakistan's government, led by Prime Minister Shehbaz Sharif, has emphasized the necessity of a new, longer-term program. The country narrowly avoided default last summer, and its economy, valued at $350 billion, has stabilized, with inflation decreasing to around 17 percent in April from a peak of 38 percent in May of the previous year.