Pakistan enters the final year of its $7 billion IMF programme with stronger reserves, rising remittances and improved market access, but major economic risks remain.
Pakistan is entering the final year of its $7 billion, 37-month Extended Fund Facility with the International Monetary Fund with a stronger economic position than it had during the 2023 crisis, raising the possibility that the country could eventually move away from its repeated reliance on IMF bailouts.
The central question for policymakers is no longer simply whether Pakistan can complete its current IMF programme, but whether it can build enough economic resilience to avoid immediately seeking another arrangement when the programme ends.
Pakistan’s foreign exchange position has improved considerably. State Bank reserves have risen to around $21.4 billion, while total liquid reserves, including commercial banks’ holdings, stand at approximately $26.8 billion. The central bank’s reserves now provide nearly three months of import cover.
The country has also regained access to international capital markets. In September, Pakistan raised a record $3 billion through a dual-tranche Eurobond, while investor orders reached almost $6 billion. The issuance indicates renewed international investor interest and provides Pakistan with an additional financing source alongside official creditors.
A proposed $10 billion exchange stabilisation facility from the United States could provide another layer of protection. The proposal remains under discussion and would neither be a loan nor a grant. If finalised, it could strengthen market confidence and provide an additional financial safety net.
Pakistan’s broader external position has also improved. Workers’ remittances reached a record $41.6 billion in fiscal 2026, up from $27.3 billion three years earlier. Services exports have exceeded $10 billion, driven largely by information technology and digital services. ICT exports alone reached about $4.6 billion in fiscal 2026, growing by more than 20% annually.
The current account has remained either in surplus or broadly balanced for the first time in 14 years, while the government is maintaining a sizeable primary surplus, with revenues exceeding expenditure before interest payments.
The rapid shift towards solar energy could also reduce Pakistan’s dependence on imported fuel. The transition is expected to lower the annual energy import bill by approximately $5 billion to $8 billion, depending on global crude oil prices.
However, merchandise exports remain a major weakness. They have remained broadly between $25 billion and $32 billion for nearly 15 years, while rising imports have contributed to a widening trade deficit.
Pakistan is now in the second year of a five-year trade liberalisation programme, whose effects are expected to become more visible over the next two to three years. Privatisation has also gained momentum, with the sale of Pakistan International Airlines ending a long-running impasse and the privatisation of the first three electricity distribution companies moving towards investor engagement and transaction stages.
Despite these gains, Pakistan remains vulnerable to external and domestic shocks. A sharp rise in oil prices, geopolitical tensions, weaker capital inflows or renewed fiscal weaknesses could again place pressure on the balance of payments. The country’s external financing requirement for 2027-28 also highlights the continuing risks posed by debt repayments and weak merchandise exports.
The next 12 months will therefore be critical. Pakistan should complete the current IMF programme while continuing to benefit from the Fund’s technical expertise and maintaining fiscal and monetary discipline.
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