Thought process revision needed in the IMF programme |
Pakistan has been hit recently by major floods and the impact in addition to loss of life is likely to be huge — reported initial estimates hover around half a percentage point decrease in economic growth for the current fiscal year, with likely increase as more information is internalized — as pointed out in the recently released October edition of International Monetary Fund’s (IMF’s) Regional Economic Outlook (REO) for Middle East and Central Asia, and titled ‘Resilience and uncertainty: will it last?’ as follows: ‘The severe flooding in Pakistan during the third quarter of 2025 may have more adverse effects on growth, inflation, and the current account than currently estimated, although these impacts remain highly uncertain.’
IMF’s October 14 dated press release no. 25/345 called for continuation of fiscal consolidation and a tight monetary policy stance, which means continuation of seeing an over-board role of austerity policies.
The press release titled ‘IMF Reaches Staff-Level Agreement on the Second Review for the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and the First Review for 28-month Arrangement Under the Resilience and Sustainability Facility (RSF) – Pakistan’ indicated in this regard: ‘The State Bank of Pakistan (SBP) remains committed to a prudent monetary policy stance, guided by incoming data, including the impact of recent floods and the evolving economic recovery, to ensure inflation remains durably within its target range of 5-7 percent.
While the floods are likely to........