The International Monetary Fund (IMF) has extended its heartfelt condolences for the lives lost in Pakistan's recent devastating floods. A senior IMF official announced that the upcoming Extended Fund Facility (EFF) review mission will analyze whether Pakistan's fiscal policies and emergency measures are equipped to effectively tackle the crisis.
Mahir Binici, the IMF's resident representative in Pakistan, stated that the mission's primary focus will be on assessing the flexibility of the FY26 budget, its spending allocations, and emergency provisions to meet the financial requirements brought about by the floods.
According to the Pakistan National Disaster Management Authority, the flash floods have led to the tragic deaths of 972 individuals. The destruction caused by the floods in Punjab province and the advancing threat in Sindh have decimated crops, livestock, and homes, raising concerns of rising food prices and heightened financial distress in the already financially struggling South Asian nation.
As policymakers in Pakistan deliberate on the monetary policy response to the disaster, it is anticipated that the central bank will maintain its key rate at 11% in the wake of the crisis. A recent Reuters poll suggests that the policymakers are balancing inflation concerns from crop damages against an already slowing economy. Analysts predict that the agricultural losses could potentially shave off up to 0.2 percentage points from this year's economic growth, with reconstruction efforts offering only a partial offset.
Back in May, the IMF approved a fresh $1.4 billion loan to assist Pakistan in building its economic resilience against climate vulnerabilities and natural calamities. However, the disbursement of these funds is contingent upon the successful completion of reviews under the EFF framework.
This latest tragedy has underscored Pakistan's vulnerability to climate change, with the Global Climate Risk Index identifying it as one of the most at-risk nations. The IMF's role in providing financial support and guidance to Pakistan aims to help the country navigate these challenges and emerge stronger in the face of such natural disasters.
