The International Monetary Fund on Saturday said its upcoming Extended Fund Facility (EFF) review mission will assess whether the country’s fiscal policies and emergency measures can adequately respond to the crisis, according to a senior official.
“The mission will assess whether the FY26 budget, its spending allocations and emergency provisions remain sufficiently agile to address the spending needs necessitated by the floods,” said Mahir Binici, the IMF’s resident representative in Pakistan.
The flash floods have killed 972 people so far, according to Pakistan’s National Disaster Management Authority.
The floods have destroyed crops, livestock and homes across Punjab province and are now pushing into Sindh, threatening fresh food inflation and deeper hardship in the cash-strapped South Asian nation.
Pakistan’s central bank is expected to keep its key rate at 11% on Monday, a Reuters poll showed, as policymakers weigh inflation risks from crop losses against a slowing economy. An analyst estimated agricultural damage could shave up to 0.2 percentage points off growth this year, with reconstruction-led demand offering only partial offset.
IMF’s board approved a fresh $1.4 billion loan in May to help Pakistan strengthen its economic resilience to climate vulnerabilities and natural disasters.
The disbursement of funds is contingent upon successful completion of reviews under the EFF, the official said.
The Global Climate Risk Index places Pakistan among the countries most vulnerable to climate change.
Earlier, it was reported that an IMF mission is scheduled to visit Pakistan on September 25 for the second review talks under $7 billion Extended Fund Facility (EFF).
In the wake of devastating floods, the macroeconomic framework might have to be revised downward/re-adjusted, including the real GDP growth rate, CPI-based inflation, monetary policy, exports, imports, and tax revenues for the current fiscal year.
The GDP growth is likely to be revised downward from 4.2% due to the severe impact on the agriculture sector and possible escalation in inflationary pressures owing to supply disruptions of food items.
The trade deficit had already widened before the floods. The implementation of Agriculture Income Tax (AIT) will also be discussed in detail, as the IMF will seek details about its potential for collection.
The CPI-based inflation might go up beyond the envisaged target of 5% to 7% for the current fiscal year. The export sector might also witness a dip, especially in rice exports, and import,s which are expected to witness a surge mainly because of damage to the farm sector caused by floods.
