Pakistan enters final year of IMF programme with chance to avoid another
Pakistan enters the final year of its $7 billion, 37-month Extended Fund Facility with the International Monetary Fund from a stronger position than in 2023, according to an analysis by a Senior Fellow with the Pakistan Institute of Development Economics who has previously served as Pakistan's ambassador to the WTO. The writer argues that Pakistan now has a credible opportunity to make the current programme its last, though the vulnerabilities that produced successive balance of payments crises have not disappeared. State Bank reserves have risen to about $21.4 billion, while total liquid reserves, including commercial bank holdings, stand at about $26.8 billion, providing roughly three months of import cover.
The external position has also been supported by renewed access to international capital markets. In September, Pakistan raised a record $3 billion through a dual-tranche Eurobond, attracting almost $6 billion in orders, the analysis notes. A proposed $10 billion exchange stabilisation facility from the United States, currently under discussion, could provide an additional financial backstop and strengthen market confidence, though it is neither a loan nor a grant. Workers' remittances reached a record $41.6 billion in fiscal 2026, compared with $27.3 billion three years earlier, while services exports crossed $10 billion and ICT exports alone reached about $4.6 billion in fiscal 2026, growing by more than 20% annually. The current account has been in surplus or broadly balanced for the first time in 14 years, and the government is running a substantial primary surplus. The rapid adoption of solar power is expected to reduce the annual energy import bill by roughly $5 to $8 billion, depending on international crude oil prices, the writer says.
Merchandise exports remain the main weak point. They have broadly stayed in the range of $25 to $32 billion for around 15 years, and with imports continuing to grow, the trade deficit has widened. The writer points to Pakistan's second year in a five-year trade liberalisation programme, whose impact should become more visible over the next two to three years through higher exports and a narrower trade deficit. Privatisation is also advancing: the sale of Pakistan International Airlines has broken a longstanding stalemate, and the process for the first three electricity distribution companies has reached investor engagement and transaction stages, with other state-owned enterprises and public assets being prepared for divestment.
Still, the analysis cautions that none of this guarantees Pakistan will avoid another crisis. An oil price shock, geopolitical disruption, a sudden stop in capital inflows or a return to fiscal slippage could again put pressure on the balance of payments, and the external financing requirement for 2027-28 shows how exposed the country remains. A large reserve buffer cannot indefinitely compensate for weak exports and large debt repayments, the writer argues. Pakistan should complete the current IMF programme, remain closely engaged with the Fund and draw on its technical expertise, but it should not assume that the programme's expiry automatically requires another one. The objective should be to make the IMF a source of advice rather than emergency financing — the real test being whether Pakistan can make this programme its last.
