The IMF Staff Mission is arriving shortly in Pakistan to undertake the second review of the on-going IMF Extended Fund Facility of USD 7 billion. Successful completion of this review will lead to the release of USD 1 billion by the IMF.

This review is of critical importance for a number of reasons. It will see the extent to which the quantitative performance criteria, indicative targets and structural conditionalities of June 2025 have been met. In effect, this will be an examination of the performance over the year, 2024-25. It will also require an evaluation of the state of the economy in 2024-25 in relation to the projections made for the year.

The impending review will also have to contend with the impact of the devastating floods on the economy. There will be need for the IMF to access the projections made following the first review of May 2025 of the key components of the economy in 2025-26.

The inevitable scaling down of projections and incorporation of risk factors will also require rationalization of the quantitative performance criteria magnitudes and indicative targets for 2025-26. Given the enhanced risk of a deterioration in the balance of payments, the IMF will have to work with the Ministry of Finance and the SBP (State Bank of Pakistan) on a feasible external financing strategy, which will ensure that Pakistan does not move into a near default situation as in 2022-23 after the 2022 floods.

The objective of the article is to examine the following:

(i) The macroeconomic outcome in 2024-25 in relation to the projections for the year by the IMF;

(ii) Extent to which the quantitative performance criteria, indicative targets and structural conditionalities of June 2025 have been met;

(iii) Revision of the macroeconomic targets and magnitudes in public finances and balance of payments in 2025-26, especially in light of the damage caused to the economy by the floods;

(iv) Consequential impact on the magnitudes of the quantitative performance criteria, indicative targets and structural conditionalities in 2025-26, which were originally set after the first review up to December 2025; and

(v) Revised estimates of the external financing requirements and the strategy for fulfilling these requirements.

Macroeconomic outcome in 2024-25

The IMF........

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