The Finance Ministry’s assurance that Pakistan’s IMF programme remains “completely on track” comes at a time when the economic narrative is being tested by rising diplomatic tensions. Reports that India has formally requested the IMF to review Pakistan’s $7 billion Extended Fund Facility and an additional $1.3 billion climate-resilience loan are a stark reminder of how regional politics can cast a shadow over economic recovery.
India’s move, on the heels of a tragic attack in Indian-administered Kashmir, risks further politicising (as if that was possible) an otherwise technocratic financial process. Islamabad’s recent gains, whether they be in fiscal consolidation, foreign reserves, or investor sentiment, should be evaluated on merit, not on the grounds of who said what to whom. Any attempt to link domestic security incidents outside Pakistan’s territory with multilateral lending is bound to set a dangerous precedent that may entangle future development funding in geopolitical disputes.
From a strictly economic perspective, Pakistan has made notable strides. There’s no denying that. There’s no reason to question that. Our foreign exchange reserves have more than tripled in the last two years; inflation has receded to its lowest level in nearly a decade while the current account deficit has narrowed significantly. Remittances keep soaring to new levels despite repeated PTI protest calls to overseas Pakistanis. All of this has generally helped boost market confidence, as evidenced by the Pakistan Stock Exchange’s sharp rise and the uptick in foreign inflows.
The credit rating upgrades by both Fitch and Moody’s, rare for an economy just emerging from a balance-of-payments crisis, suggest that Pakistan’s reform commitments under the IMF programme are being taken seriously by international lenders. Moreover, strategic financial cooperation with China, including an expanded currency swap line and plans to issue Panda bonds, has added a layer of external buffer to the country’s macroeconomic framework.
Of course, it need not be said how this progress is still fragile (to put it mildly). The IMF Board’s upcoming review will be crucial not only for the disbursement of the next tranche but also for sustaining the broader narrative of economic recovery. It is, hence, essential to safeguard this process against political pressures.
It can only be hoped that somewhere in the short run, sane voices in New Delhi will begin to realise how the ongoing crisis, may it be through treaty suspensions, airspace closures, or financial lobbying, cannot serve any constructive purpose. What we need now (on both sides of the border) is restraint, not more provocation.
