IMF says its loan programme has strengthened the South Asian country's fiscal buffers before the Covid pandemic began, and a strong economic recovery has taken hold since mid-2020.
The International Monetary Fund has said its executive board approved a $1 billion disbursement to Pakistan after completing a sixth review of the country's reforms under its $6 billion loan programme.
The disbursement announced on Wednesday brings Pakistan's total draw against the extended fund facility programme for budget support to about $3 billion. The programme was initially approved in July 2019.
The IMF said on Wednesday the programme had strengthened Pakistan's fiscal buffers before the start of the Covid-19 pandemic, and a strong economic recovery has taken hold since the summer of 2020.
But it warned that a widening current account deficit and currency depreciation had reinforced domestic price pressures.
Pakistan's GDP growth is expected to reach 4 percent this year, but its economy remains vulnerable to flare-ups of Covid-19, tighter international financial conditions, a rise in geopolitical tensions and delayed implementations of structural reforms, the IMF said.
Pakistani economy recovering
"The Pakistani economy has continued to recover despite the challenges from the Covid-19 pandemic, but imbalances have widened and risks remain elevated. The authorities' recent policy efforts to strengthen economic resilience are welcomed," IMF Deputy Managing Director Antoinette Sayeh said in a statement.
"Timely and consistent implementation of policies and reforms remain essential to lay the ground for stronger and more sustainable growth," she added.
Sayeh added that preserving a market-determined exchange rate was crucial to absorb external shocks and maintain Pakistan's competitiveness and amendments to central bank legislation would help strengthen the institution's independence.
"Strong efforts to advance electricity sector reform are needed to restore the sector's financial viability and address adverse spillovers on the budget, financial sector, and real economy," she added.