The Institute of International Finance (IIF) highlights Pakistan’s key challenge of fiscal consolidation and reforms amid a weak coalition government and political instability due to allegations of electoral fraud. While exchange rate, monetary policy, energy subsidies, and state-owned enterprise reforms are progressing well, fiscal deficits remain a concern, with public debt rising substantially. The IIF predicts difficulties in meeting tax revenue targets and implementing expenditure cuts. Political turblence, especially between Imran Khan and the military, adds to the risks, with tensions likely to escalate and affect negotiations with the IMF. Pakistan’s historical precedent of prime ministers not completing their terms and the nation’s frequent IMF engagements underscore the challenges ahead, particularly in managing maturing public debt. The IIF emphasizes the importance of a new IMF program given the financing constraints faced by Pakistan.
