By Staff Reporter
ISLAMABAD: The International Monetary Fund urged Pakistan on Thursday to quicken the pace of structural reforms pledged under its $7 billion bailout package, saying the step would help the cash-strapped South Asian nation solidify economic growth, preserve macroeconomic stability and ramp up exports.
Pakistan has navigated a tough stretch of economic stabilisation in recent years, grappling with high inflation, a weakening currency and persistent financing shortfalls. But international credit rating agencies have taken note of progress since Islamabad kicked off privatization of loss-making state-owned enterprises and phased out subsidies as part of the IMF’s Extended Fund Facility (EFF) program.
Speaking at a virtual media roundtable focused on the resilience of emerging markets, Jihad Azour, the IMF’s director for the Middle East and Central Asia, described Islamabad’s execution of the EFF requirements as “strong” even amid catastrophic floods that claimed more than 1,000 lives and ravaged agricultural lands, prompting the government to dial back its growth forecast from 4.2% to 3.9%. “What is important going forward in order to strengthen growth and to maintain the level of macroeconomic stability is to accelerate the structural reforms,” Azour said during the session, which also featured Pierre-Olivier Gourinchas, the IMF’s economic counsellor and director of research.
The discussion served as a lead-in to the 2026 edition of the AlUla Conference, a top-tier policy gathering co-hosted by Saudi Arabia’s finance ministry and the IMF on Feb. 8-9 to tackle pressing challenges and prospects for emerging markets.
Last month, the IMF’s executive board wrapped up its second review of the EFF and the inaugural review under the companion Resilience and Sustainability Facility (RSF), unlocking a combined $1.2 billion in disbursements for Pakistan.
Azour highlighted Islamabad’s push to privatize certain state-owned enterprises and enhance financial oversight of key public entities, especially in the power sector, as a critical avenue for expanding the economy’s export potential. “This comes in addition to the effort that the authorities have made in order to reform their tariffs, which will allow the private sector of Pakistan to become more competitive,” the IMF official added.
In December, Prime Minister Shehbaz Sharif’s administration completed the privatisation of Pakistan International Airlines (PIA), offloading a 75% stake to a consortium headed by the Arif Habib Group for Rs135 billion. The IMF issued a statement earlier this month hailing the PIA deal’s conclusion as a key milestone under the bailout terms.
“Of course, the strong implementation of the program by the authorities, despite the recent devastating floods, helped maintain stability as well as also improving the financing and external conditions that are supported by the EFF,” Azour said. He pointed to the government’s attainment of a current account surplus in the prior fiscal year – the first in 14 years – as a significant achievement. Official data from the State Bank of Pakistan showed a $1.93 billion surplus for the year ending June, flipping a $2.1 billion deficit from the previous period.
Azour noted that Pakistan’s primary fiscal balance had exceeded program benchmarks, crediting administrative reforms and broader structural efforts. “The authorities, as you know, have reaffirmed their commitment to the program,” he said. “The recovery remains on track.”
Surveying economies in his region, Azour characterised 2026 as “a story of resilience” for the Middle East, where projections for economic growth had been revised upward despite pervasive uncertainty. “2026 is a year of high uncertainty, especially as we see currently on the geopolitical front,” Azour said, referencing fresh strains between the United States and Iran along with other flashpoints in the restive area.
He outlined four primary risks looming over the region this year: escalations in geopolitical conflicts; broader global uncertainty that might shave up to three percentage points off growth in affected countries with a lag of roughly two years; strains on debt sustainability amid tighter worldwide financing; and swings in oil prices that could erode current accounts and deplete foreign reserves. “The last impact is any international adjustment or any adjustment in the AI industry could also have an impact on some of the countries, especially those who are heavily invested in AI,” Azour said.
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