With its GDP increasing to less than 3% since 2023, the recording of inflation and natural disasters, the economy of Pakistan was in shock from several shocks which finally led him to seek another bailout of the International Monetary Fund. Its external debts, analysts highlight would not be funded without the IMF package with its total external debt to $ 131 billion by December 2024.
After having contracted 0.2% during their exercise from July 2022 to June 2023, the economy of Pakistan was on a recovery route with growth in GDP at 2.5% in financial year 24 and estimated at 2.7% in financial year 25 in accordance with the World Bank. Its economic growth was considered an increase of 3.1% in financial year 26, in accordance with the estimate of the World Bank. Inflation, which had reached a peak of almost 40% in the middle of 2023 in Pakistan, fell to 0.7% by March 2025 and 0.3% by April of this year.
“In Pakistan, the economy continues to recover from a combination of natural disasters, external pressures and inflation. Inflation has slowed down faster than expected, offering a place for additional monetary easing,” noted the development report of South Asia of the World Bank published in April 2025.
“The agreement concluded in September 2024 on a political program supported by the IMF contributed to stabilizing the exchange rate and reducing the risk of debt defect, as evidenced by the upgrades of ratings of several rating agencies and the narrowing of the borrowing spreats”, underlined the report noting the crucial role of the rescue of the IMF in Pakistan.
FMI bailout
On May 9, the IMF executive council approved the first examination of the Pakistan economic reform program supported by the arrangement of prolonged funds (EFF) which allowed an immediate disbursement of around 1 billion dollars to the nation. With this, the total IMD Pakistan disbursements under the arrangement are now 2.1 billion dollars. In addition, the IMF board of directors approved the authorities’ request from an arrangement under resilience and sustainability (RSF), with access to around 1.4 billion dollars (1 billion SDR).
During the meeting, India raised concerns about the efficiency of the IMF programs in the event of Pakistan given its bad history and refrained from voting.
The 37 -month -old installation that was approved by the IMF in September 2024, had started to show certain results, in accordance with the IMF press release, which noted that Pakistan’s budgetary performance was strong with a primary surplus of 2% of GDP in the first breast of FY25. The Progress On Disinflation and Steadier Domestic and External Conditions, Have Allowed the State Bank of Pakistan to Cut the Policy Rate by A Total of 1100 BPS since June 2025, The imf Note, Adding that big reserve stod at $ 10.3 Billion at end-April, up from $ 9.4 Billion in August 2024, and Projected to reach $ 13.9 Billion by end-june 2025 and continues to be rebuilt over the medium term.
Analysts also expected a resumption of consumer demand and business confidence.
Risks continue:
But the current conflict with India will certainly prove to be an obstacle to the Pakistani economy with investors and the confidence of companies that take place to decline and a new depreciation of government finances. Several other risks have continued and Pakistan would have a long way to go to obtain a complete turnaround of its economy.
Analysts note that governance continues with internal political stress is a key risk for Pakistan as well as the impact of climate change that has led to separate floods in recent years while access to fresh water remains a challenge for the country.
More worrying, its external debts obligations remain high without adequate exchange reserves.
The ratings of Moodys in its credit notice on Pakistan in February of this year have noted that the risks of external vulnerability of Pakistan remain high. “Although the increase, exchange reserves remain much lower than what is necessary to comply with its external obligations in the coming years,” he said. Refunds of the government’s main debt of the government are around 22 to 23 billion dollars each year during the year 2025-2027.
“The country continues to depend on the appropriate financing of official partners to fully comply with its external obligations, stressing the importance of stable progress with its EEF of the IMF program to continually unlock funding,” he noted.
That’s not all. The country has a poverty rate of 21.9%, which means that almost a quarter of its population is unable to afford basic items. Its per capita GDP rate was $ 1,566 in 2023-24. Its unemployment rate was 8.3% during the 2010 financial year and was projected at 8% in fiscal year 25 according to the IMF. In accordance with the United Nations human development index, Pakistan was ranked 164 on a list of 193 countries in 2023.
