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  • Publication | 2024

Pakistan Development Update October 2024

Global Food and Nutrition Security

Pakistan faced an economic crisis at the beginning of fiscal year (FY)24 with heightened risks of debt default. Political uncertainty, fiscal and external imbalances and global monetary tightening led to pressures on domestic prices and foreign reserves. To preserve reserves, measures to manage imports and capital outflows were introduced, disrupting local supply chains and economic activity and exacerbating inflationary pressures. With the approval of the International Monetary Fund (IMF) Stand-By Arrangement (SBA) in July 2023, exchange rate flexibility was restored, import controls were relaxed, and fiscal consolidation measures were introduced. Political uncertainty also diminished after the general elections were held. The economy returned to positive growth; inflation slowed as the exchange rate stabilized and pressures from energy tariff increases moderated; and foreign exchange reserves recovered, supported by new external inflows and a narrowing current account deficit (CAD). Slowing inflation has allowed a gradual relaxation of monetary policy, which is in turn supporting confidence and helping to moderate increases in domestic debt servicing costs. The IMF Executive Board approved the new 37-month Extended Fund Facility (EFF) program in September 2024, which is intended to address longer-term constraints to stability and growth.