KARACHI: As Pakistan is expected to use the International Monetary Fund’s loan facility to steer the country out of prevailing economic crisis, economists believe the country will have to bear the brunt of being on the Financial Action Task Force (FATF) gray list.
Imran Khan, the next prime minister of Pakistan in line, promises to work on human development in the country but his party faces tough economic challenges and is left only with the option to move to the IMF.
Pakistan was put on list of “Jurisdictions with strategic deficiencies,” known as the gray list, by the money laundering and terrorism-financing watchdog FATF. It was listed on June 29, 2018. The country has been on the list twice, in 2008 and 2012.
“Pakistan has been put on gray list of FATF, which means the IMF loan will be extended at higher interest rates and the burden will again be shifted on to the vulnerable and tax-paying class,” Dr. Ayub Mehar, research economist at Asian Development Bank Institute, told Arab News.
There is no question of the IMF denying loans to Pakistan by IMF because it is responsible for the fund to facilitate the member country, Mehar said. Pakistan can avail under special drawing rights up to $2.8 billion from the IMF.
The IMF program’s condition may include expenditure cuts as part of government austerity, which in turn will affect the economically vulnerable class in Pakistani society. “The IMF comes with its own assessment of the country but it largely depends on the extent to which the government can effectively negotiate terms with the fund,”, Dr. Asad Sayeed, research economist at the Institute of Development and Economic Alternatives, told Arab News.
As part of its expenditure cut, the government is likely to withdraw subsidies being given to the poor segment. “Whenever the expenditure cut is talked about, it is always viewed by which segment is going to bear the brunt. It will depend how the government is going to protect the interest of the poor, middle-class segments,” Dr. Sayeed noted.
The economists believe Khan’s government will have to confront a huge current account deficit, caused by trade and fiscal deficits, and the instability of the national currency which has been devalued for the fourth time since December 2017. “The IMF will call for further devaluation of the Pak rupee and expenditure cuts which means the country will have to compromise on the its development spending,” Muzzamil Aslam, senior economist and CEO of EFG-Hermes Pakistan, told Arab News.
The rising imports have increased the current account deficit of Pakistan to a historic high of $18 billion during the last fiscal year, which continues to exert pressure on the Pak rupee against other currencies following the huge demand/supply gap. Pakistan imported $60.9 billion worth of goods while its export stood at only $23.22 billion during the last fiscal year, FY18.
Mehar noted: “Other factors such as less inflow of foreign direct investment have also played a crucial role in the weakening of Pakistan’s foreign exchange reserves, which have gone down to $9 billion.”
As the external financing gap keeps rising — it is expected to be remain at $17 to $18 billion during the current fiscal year, FY19 — the country needs substantial external inflows to fulfil its international obligations. “Pakistan needs $10 to $15 billion for external debt servicing alone within the next 16 months,” Muzzamil Aslam said.
Economists say the PTI government will have to take tough economic decisions at home while negotiating for a new IMF bailout program. Tax net expansion, privatization or restructuring of loss-making public sector entities, ease of doing business, and supply of energy without interruption are areas that an incoming government will have to focus on.
Imran Khan’s development promises may face setback if economy keeps worsening, warn economists
Imran Khan’s development promises may face setback if economy keeps worsening, warn economists
- IMF may extend loans at higher rates, vulnerable segment to bear the brunt
- Pakistan needs $10-15 billion for debt servicing within next 16 months
Pakistan reports current account surplus in Jan. owing to improved trade, remittances
- Pakistan’s exports crossed the $3 billion mark in Jan. as the country received $3.5 billion in remittances
- Last month, IMF urged Pakistan to accelerate pace of structural reforms to strengthen economic growth
ISLAMABAD: Pakistan recorded a current account surplus of more than $120 million in January, the country’s finance adviser said on Tuesday, attributing it to improved trade balance and remittance inflows.
Pakistan’s exports rebounded in January 2026 after five months of weak performance, rising 3.73 percent year on year and surging 34.96 percent month on month, according to data released by the country’s statistics bureau.
Exports crossed the $3 billion mark for the first time in January to reach $3.061 billion, compared to $2.27 billion in Dec. 2025. The country received $3.5 billion in foreign remittances in Jan. 2026.
Khurram Schehzad, an adviser to the finance minister, said Pakistan reported a current account surplus of $121 million in Jan., compared to a current account deficit of $393 million in the same month last year.
“Improved trade balance in January 2026, strong remittance inflows, and sustained momentum in services exports (IT/Tech) continue to reinforce the country’s external account position,” he said on X.
Pakistan has undergone a difficult period of stabilization, marked by inflation, currency depreciation and financing gaps, and international rating agencies have acknowledged improvements after Islamabad began implementing reforms such as privatizing loss-making, state-owned enterprises (SOEs) and ending subsidies as part of a $7 billion International Monetary Fund (IMF) loan program.
Late last month, the IMF urged Pakistan to accelerate the pace of these structural reforms to strengthen economic growth.
Responding to questions from Arab News at a virtual media roundtable on emerging markets’ resilience, IMF’s director of the Middle East and Central Asia Jihad Azour said Islamabad’s implementation of the IMF requirements had been “strong” despite devastating floods that killed more than 1,000 people and devastated farmland, forcing the government to revise its 4.2 percent growth target to 3.9 percent.
“What is important going forward in order to strengthen growth and to maintain the level of macroeconomic stability is to accelerate the structural reforms,” he said at the meeting.
Azour underlined Pakistan’s plans to privatize some of the SOEs and improve financial management of important public entities, particularly power companies, as an important way for the country to boost its capacity to cater to the economy for additional exports.
“This comes in addition to the effort that the authorities have made in order to reform their tariffs, which will allow the private sector of Pakistan to become more competitive,” the IMF official said.
