ISLAMABAD — Pakistan has informed the International Monetary Fund (IMF) that the country has suffered economic damages worth Rs371 billion due to recent floods, forcing authorities to revise down the GDP growth target for FY2025-26 from 4.2% to 3.9%.
According to official sources, senior officials from the Ministry of Finance briefed the IMF’s review mission this week, outlining both the scale of flood destruction and the country’s external financing requirements of nearly $26 billion. Of this, around $12 billion is expected to be rolled over, with China once again assuring the Fund that it would meet all refinancing commitments within the agreed timeline.
Finance officials told the IMF that despite the challenges, Pakistan does not intend to impose any new flood-related taxes. However, the economic fallout has already begun to reshape the government’s growth projections.
Flood Devastation in Numbers
The floods left a grim trail of destruction:
- Casualties: 1,006 deaths and over 1,000 injuries.
- Housing: More than 12,500 houses damaged nationwide, with Balochistan and Khyber Pakhtunkhwa suffering the worst.
- Infrastructure: 2,133 kilometers of roads, 248 bridges, 1,098 schools, and 128 health facilities were damaged.
- Agriculture: 3.26 million acres of crops destroyed, including cotton, wheat, sugarcane, and maize.
Cotton production alone is expected to fall by up to 2 million bales, while wheat output may shrink by as much as 1.3 million tons. The sugarcane and maize harvests are also projected to see steep declines. Officials estimate total agricultural losses at Rs155 billion, with the sector’s growth rate cut from 4.5% to around 4%.
The industrial and services sectors are also expected to feel the impact, with modest downward revisions in their growth outlook.
External Financing and Bonds
On external financing, Pakistan indicated plans to return to international capital markets later this fiscal year, possibly issuing a Eurobond in the April–June 2026 quarter. However, officials stressed that this would depend on two conditions: a further rate cut by the US Federal Reserve and an improved credit rating for Pakistan.
In the meantime, Islamabad is preparing to launch a Panda bond in the Chinese market by November 2025, aiming to raise between $250 million and $300 million, followed by a second tranche in April 2026.
Pakistan also highlighted its recent efforts to bolster foreign exchange reserves, noting that the State Bank purchased over $500 million from the interbank market in June, with total purchases reaching $7.7 billion.
Balancing Growth and Debt
The IMF was briefed that Pakistan’s economy is now dealing with dual challenges: recovering from climate-induced devastation while meeting external debt obligations. Earlier this week, Pakistan successfully repaid $500 million on a maturing Eurobond, with another $1 billion payment due by April 2026.
For now, Islamabad is walking a tightrope seeking relief on growth targets while trying to maintain fiscal credibility before international lenders.
