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IMF Warns Political Uncertainty Threatens Economy

IMF Warns Political Uncertainty Threatens Economy

The International Monetary Fund (IMF) highlighted concerns over the delayed implementation of certain reforms by the government, stating that high political uncertainty and resurging social tensions due to a complex political landscape could hinder the execution of economic stabilization policies.

In its recent staff level report on the outcomes of the $3 billion Stand-by Arrangement (SBA), the IMF acknowledged Pakistan’s strong performance in achieving key goals but underscored risks primarily arising from political tensions and the exceptionally high level of external financing requirements.

While acknowledging Pakistan’s achievements in meeting its immediate objectives, the IMF emphasized that significant challenges remained, necessitating sustained efforts to effectively address them.

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The IMF outlined Pakistan’s persistently high fiscal and external vulnerabilities, including concerns regarding debt sustainability, refinancing risks, and the need to restore external viability for timely repayment to the Fund. These challenges are compounded by risks related to credit concentration, sociopolitical tensions, and security issues.

Moreover, the IMF expressed concerns over the delay in implementing certain reforms initiated by the caretaker government, stressing the importance of expediting their execution. For instance, the launch of a scheme to register retailers and enforce tax obligations, originally planned for January 1, 2024, has been postponed, with only 637 retailers registered as of May 8, compared to 75 by April 30.