IMF flags potential social tension risks in Pakistan

May 10, 2024 (MLN): The International Monetary Fund (IMF) has raised concerns that a potential resurgence in Pakistan's social tensions, reflecting the complex political scene and high cost of living could weigh on policy and reform implementation.

The fund highlighted in its second and final review report today that despite the government's indication of its intention to uphold the policies outlined in the SBA, significant political uncertainty persists.

Policy slippages, together with lower external financing, could undermine the narrow path to debt sustainability and place pressure on the exchange rate.

The fund said that delays in post-program external financing disbursements would also place further pressure on banks to finance the government (further exacerbating crowding out of the private sector).

Moreover, geopolitically driven higher commodity prices and disruptions to shipping, or tighter global financial conditions, would also adversely affect external stability.

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