Washington, Dec 12 (NationPress) The International Monetary Fund (IMF) has expressed significant concerns regarding Pakistan's economic governance and reform progress, even as it approved a fresh release of approximately $1.2 billion as part of its bailout initiatives. The Fund cautioned about potential risks stemming from policy deviations, ineffective institutions, and ongoing structural weaknesses.

In a report published Thursday following the IMF Executive Board's completion of the second evaluation of Pakistan's Extended Fund Facility (EFF) and the initial review under the Resilience and Sustainability Facility (RSF), the organization confirmed an immediate disbursement of around $1 billion under the EFF and nearly $200 million under the RSF.

This approval was accompanied by a request for a waiver regarding non-compliance with a performance criterion, highlighting ongoing deficiencies in Pakistan's adherence to program obligations.

The IMF acknowledged that, despite the Pakistani authorities demonstrating strong program implementation, the economy continues to face substantial risks and demands consistent discipline to prevent regression.

“Policy priorities must focus on maintaining macroeconomic stability and advancing reforms to enhance public finances, improve competition, increase productivity, and strengthen the social safety net and human capital,” the IMF stated.

The mention of state-owned enterprises and the energy sector reflects the IMF's long-standing concerns about chronic inefficiencies, losses, and fiscal drains that have consistently undermined Pakistan's stabilization efforts.

In its staff report, the IMF emphasized that program monitoring depends heavily on detailed and ongoing reporting by Pakistani authorities, including the State Bank of Pakistan, the Ministry of Finance, and other relevant agencies, warning that any instances of non-compliance with continuous performance criteria must be reported without delay.

The Fund also highlighted Pakistan's significant debt burden and dependence on external financing. The report indicated that total public debt exceeds $307 billion, with external debt comprising more than one-third of this total, and IMF obligations being a substantial part of multilateral liabilities.

While progress has been acknowledged, the IMF made it clear that these advancements remain delicate.

“Fiscal performance has been commendable, achieving a primary surplus of 1.3 percent of GDP in FY25, meeting established targets,” the IMF noted, adding that inflation has risen, attributed to the impact of floods on food prices, with household pressures remaining severe.

The IMF reiterated that Pakistan's economic recovery is susceptible to shocks and policy reversals, especially in a challenging global climate.

“Ongoing robust policy execution has aided Pakistan in managing several shocks this year,” the IMF observed in its executive summary, but cautioned that “the recent floods have slightly dampened the outlook for FY26.”

The Fund also stressed the urgency of reforms related to climate resilience, warning that Pakistan's recurrent exposure to natural disasters presents long-term economic risks.

“The recent floods emphasize the necessity of swiftly implementing climate-related reforms to build resilience against the frequent natural disasters that Pakistan encounters,” the IMF noted, indicating that progress in this area is supported by the RSF.

Despite rebuilding foreign exchange reserves to $14.5 billion by the end of FY25, up from $9.4 billion the previous year, the IMF asserted that reserves must be bolstered over the medium term through prudent macroeconomic management.

The IMF's assessment raises alarms for India and the region, reinforcing worries regarding Pakistan's ongoing dependence on international bailouts, weak reform follow-through, and structural economic vulnerabilities that impact regional stability and growth.

Pakistan's 37-month EFF was sanctioned in September 2024, while the 28-month RSF received approval in May 2025. The combined programs aim to stabilize Pakistan's economy, restore confidence, and support reforms, but the IMF's latest evaluation underscores that sustained compliance and reform momentum remain essential.

Pakistan has sought assistance from the IMF over 20 times since the late 1980s, indicative of chronic balance-of-payments issues, limited tax bases, and governance weaknesses. India has consistently argued in international platforms that repeated bailouts without substantial structural reforms have failed to achieve lasting stability.

The IMF's latest warnings emphasize that, despite the additional funding, Pakistan's economic challenges are far from resolved, and ongoing scrutiny will be vital for the future evaluations of the program.