The International Monetary Fund (IMF) anticipates that Pakistan’s inflation rate, which has decreased from 29% to 12.6% this year, will further decline to 10.6% by 2025, according to Jihad Azour, the IMF’s Director for the Middle East and Central Asia.
In a recent statement regarding Pakistan’s economic outlook, Azour noted that the country’s economy is projected to grow by 3.2% in the fiscal year 2024-25, indicating signs of economic recovery.
Azour highlighted that Pakistan’s reform agenda is designed to achieve critical goals such as fiscal stability, increased revenue, and reduced deficits. He pointed out that enhancements in tax collection and addressing systemic challenges could significantly boost the country’s revenue.
He also emphasized the importance of reforming state-owned enterprises to create more opportunities for the private sector, attract foreign investment, and strengthen Pakistan’s export capacity.
Additionally, Azour explained that fostering a favorable investment climate in Pakistan is crucial. He stated that current fiscal policies are alleviating inflationary pressures and facilitating capital flows, thereby easing the burden on the country’s current account.
Azour expressed optimism that these initiatives would stabilize the economy, reduce financial risks, and improve the energy sector.
Moreover, Finance Minister Muhammad Aurang has announced that Pakistan is seeking approximately $1 billion in funding from the IMF’s facility designed to assist low and middle-income countries in managing climate risks.
“We have officially requested consideration for this facility,” Aurang stated during an interview on the sidelines of the IMF/World Bank autumn meetings in Washington.
The IMF had already approved a $7 billion bailout for Pakistan, but further funding is accessible through its Resilience and Sustainability Trust (RST). Established in 2022, the RST provides long-term concessional funding for climate-related initiatives, including adaptation and the transition to cleaner energy.
“We believe we are strong candidates for this facility,” Aurangzeb said, adding that they aim to finalize the request in the upcoming months.
Aurangzeb also mentioned discussions with “a few other institutions,” alongside the AIIB, regarding credit enhancements. These enhancements offer some level of assurance for bonds, potentially improving their ratings, attracting more investors, and consequently lowering the government’s borrowing costs.
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