In a first, Pakistan finalises mechanism for environmental budget

ISLAMABAD: The federal finance ministry has finalised a new mechanism for the environmental budget for the upcoming fiscal year 2025–26, starting July 1, in line with a condition set by the International Monetary Fund (IMF).

According to Dawn News, from the next fiscal year onwards, all expenditures allocated for environment-related initiatives will be identified, and climate-related spending will be tagged within the subsidy framework.

Finance ministry sources said that under IMF conditions, a new procedure has been devised for the climate budget. As per the plan, “climate budget” tagging will be extended to subsidies and grants to ensure that all climate-related annual expenditures can be properly tracked from the next fiscal year.

The finance ministry has asked all relevant ministries and divisions to submit their budget estimates by May 30.

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In this regard, additional Form 3C has been sent to ministries and divisions for completion. According to ministry sources, the tagging of climate-related subsidies is part of the conditions attached to the IMF’s current $7 billion loan programme.

It is worth noting that the IMF has already advised Pakistan to invest one per cent of its GDP annually—estimated at over Rs1.24 trillion this year—in climate resilience and adaptation reforms.

Such investment would help the country prepare for increasingly frequent and severe weather events, especially floods, maintain economic growth, and reduce inequality.

The IMF believes that investment in climate-resilient infrastructure can reduce the negative growth impacts of natural disaster risks by up to one-third while ensuring faster and more complete recovery.

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