Business
IMF sees Pakistan stepping back from default risk
The latest International Monetary Fund (IMF) projections for Pakistan suggest that the immediate risk of economic free fall has eased but the country remains locked into a narrow stabilisation path marked by weak growth, heavy debt and limited relief for households.
Statistics by the Fund, which late on Tuesday approved a fresh disbursement of around $1.2 billion to Pakistan, showed that Pakistan’s economic growth was projected to inch up from 2.6 per cent in FY2024 to 3.2pc by FY2026, a pace that barely matches population growth in the country of 240.5 million people.
With a per capita income of $1,677, this trajectory points more to economic containment than recovery.
Pakistan’s population also continues to grow at a high pace, with mid-2025 official figures citing 2.55pc, while World Bank data points to 1.8–1.9pc. Though slightly lower than past peaks, the rate remains a significant development challenge.
Pakistan, however, appears to have made the most striking turnaround in inflation. After averaging 23.4pc in FY2024, consumer prices are estimated to have fallen sharply to 4.5pc in FY2025, and projected to rise to 6.3pc in FY2026.
End-period inflation is also projected to ease from 12.6pc in FY2024 to 3.2pc in FY2025, before climbing to 8.9pc in FY2026. The disinflation reflects tight monetary policy, lower subsidies and compressed demand under the IMF programme, though the projected rebound suggests price stability remains fragile.
Labour market conditions offer limited comfort. Unemployment is projected to fall only modestly from 8.3pc in FY2024 to 7.5pc in FY2026, underscoring the weak job-creating capacity of the current growth path.
On the fiscal front, the adjustment underway is substantial. Government revenue and grants are projected to rise from 12.7pc of the gross domestic product (GDP) in FY2024 to 16.3pc by FY2026, while expenditure is expected to remain near 20pc of GDP.
As a result, the budget deficit is projected to narrow from -6.8pc to -4.0pc of the GDP. Pakistan is also projected to maintain a primary surplus rising to 2.5pc of the GDP, a central IMF benchmark.
Despite this tightening, the public debt burden remains heavy. Total general government debt, including IMF obligations, is projected to hover around 72–73pc of the GDP, while government and guaranteed debt is expected to stay near 76pc.
Domestic debt accounts for nearly half of the GDP, keeping interest costs elevated amid high domestic borrowing rates.
External pressures have eased but vulnerabilities persist. The current account balance is projected to remain close to zero, shifting from a 0.6pc of GDP deficit in FY2024 to a 0.5pc surplus in FY2025, before slipping back into a small deficit in FY2026. Foreign exchange reserves are projected to rise from $9.4bn in FY2024 to $17.8bn by FY2026, lifting import cover from 1.6 months to 2.7 months — an improvement, but still short of comfortable levels.
Foreign investment, however, remains subdued. Foreign direct investment (FDI) is projected at just 0.5–0.6pc of the GDP throughout the period under review, pointing to persistent investor caution despite improved macro stability.
Monetary conditions also remain tight. Broad money growth is projected in the 14–16pc range, while private sector credit growth, though improving from 6pc to 15pc, remains constrained by high interest rates. The six-month treasury bill rate stood at 21.5pc in FY2024, reflecting the heavy cost of domestic borrowing.
Meanwhile, the 15.4pc real effective appreciation of the rupee in FY2024 signals a shift towards currency stability after a period of sharp depreciation, though it also carries risks for export competitiveness in an economy where textiles, valued at $17.3bn, remain the dominant export.
Taken together, the IMF projections depict an economy that has regained short-term stability through sharp fiscal and monetary adjustment, but remains burdened by high debt, weak investment and slow employment growth.
The immediate crisis may have passed, but the challenge of translating stabilisation into sustained, inclusive growth remains unresolved.
KARACHI: Instead of improving, the foreign investment climate has become more difficult for Pakistan, as seen in treasury bills where outflows surged by 54 per cent in November — a trend similar to that of foreign direct investment (FDI).
November proved to be the worst month for T-bill inflows and outflows so far in FY26. According to the State Bank’s latest data, foreign inflows in T-bills amounted to $77 million against outflows of $119m during the month.
Most of the outflows went back to Arab countries despite their assurances of investing in Pakistan. The trend is disappointing for a government striving to attract foreign investors across sectors and offering incentives through the Special Investment Facilitation Council (SIFC). Despite its creation to draw investment, the SIFC has yet to achieve meaningful results, and the Board of Investment has also been unable to secure major successes.
During November, the highest inflows came from the UK at $37m, followed by $20m from the UAE and $19m from Bahrain. However, the largest outflows — $51m and $41m — also went to the UAE and Bahrain, respectively, while the UK saw an outflow of $27m.
Govt raises Rs1.2tr amid over-liquid market
The inflow-outflow pattern shows that only a few countries are investing small amounts in high-yielding (around 11pc) T-bills. Despite attractive returns, the broader investment environment appears unappealing. Ongoing terrorism in two provinces and tensions with India and Afghanistan have further undermined investor confidence.
This is reflected in the shrinking FDI, which fell by 26pc in the first four months of the current fiscal year — already the lowest level in the region.
In the first five months of FY26, T-bill inflows were still higher than outflows at $410m compared to $333m during the same period.
Analysts and currency watchers remain pessimistic about any substantial improvement in foreign investment in the second half of the fiscal year.
The government, however, hopes to generate dollars through the sale of PIA and other assets, although major bidders are expected to be Pakistani investors with strong industrial presence. Despite the government signing MoUs with countries, including Saudi Arabia and the UAE, observers do not see significant foreign investment materialising anytime soon.
Treasury bills, bonds
The government raised a total of Rs1.2 trillion through the auction of Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) on Wednesday.
According to the State Bank, the government raised Rs884.7bn through direct auction of T-bills and Rs97bn through non-competitive bids, bringing the total to Rs981.7bn. An additional Rs190.7bn was raised via 10-year PIBs, taking the day’s total mobilisation to Rs1.2tr.
The market appears over-liquid, with T-bill bids reaching Rs1,925bn and PIB bids Rs523bn — a combined Rs2.448tr. This also indicates low private-sector borrowing and sluggish economic activity, mirroring the past three years.
Published in Dawn, December 11th, 2025
ISLAMABAD: The Exim Bank of the United States has approved $1.25 billion in financing to support the mining and critical minerals in Reko Diq, US Charge d’Affaires in Pakistan, Natalie Baker said in a video statement on Wednesday.
In the coming years, she said in her message on social media, the project financing will bring in $2bn in high-quality US mining equipment and services needed to build and operate Reko Diq mines.
Along with creating an estimated 6,000 jobs in the US and 7,500 jobs in Balochistan, the Reko Diq project serves as a model for mining projects, benefiting US exporters as well as local Pakistani communities and partners by bringing employment and prosperity for both nations, Ms Baker said.
Such initiatives are central to American diplomacy, she said, foreseeing further agreements between US companies and their Pakistani counterparts in the critical minerals and mining sector.
Published in Dawn, December 11th, 2025
ISLAMABAD: The state-owned Oil and Gas Development Company Ltd (OGDC) announced on Wednesday that it has made a significant oil and gas discovery in the Nashpa Block of Kohat in Khyber Pakhtunkhwa.
In a statement, the country’s largest oil and gas producer said the hydrocarbon resource was found at its exploratory well Baragzai X-01 (Slant) in Nashpa Block.
“The well is currently producing 2,280 barrels per day of oil and 5.6 million standard cubic feet per day (mmscfd) of gas, through choke size 32/64” at wellhead flowing pressure of 2400 psi”, it said.
This marked the first hydrocarbon discovery from the Kingriali Formation in the Nashpa Block.
Published in Dawn, December 11th, 2025
$119m withdrawn from T-bills in Nov
US Exim Bank okays $1.2bn for Reko Diq
Oil, gas found in Kohat
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