Low external financing may squeeze private sector credit, IMF report warns

ISLAMABAD: Despite recent elections and commitments from the new government to uphold standby arrangement policies, Pakistan continues to grapple with political uncertainty, according to a report from the International Monetary Fund (IMF).

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The IMF’s assessment underscores the complexities facing Pakistan’s political landscape, citing inflation and social tensions as potential obstacles to the implementation of crucial policy reforms. The report says that despite assurances by the new government, the political instability can create hurdles in the implementation of economic reforms.

Highlighting the risks posed by non-implementation of economic policies and limited external financing, the IMF warns of mounting pressure on debt and exchange rates. Moreover, delays in securing external financing could exacerbate strains on private banks, compelling them to extend lending to the government.

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This, in turn, could further diminish financing opportunities for the private sector, amplifying economic challenges for the country. The IMF further cautions that disruptions in shipping or tightening global financial conditions could add to Pakistan’s external stability woes.