Pakistan’s reform performance has remained strong despite tough economic conditions and the impact of recent floods, the International Monetary Fund (IMF) said on Thursday, noting that the country delivered a 1.3% primary surplus in FY25 while foreign exchange reserves climbed to $14.5 billion.

The assessment came as the IMF completed Pakistan’s second review under the Extended Fund Facility (EFF) and approved the first review of the Resilience and Sustainability Facility (RSF). The decision triggered an immediate disbursement of $1 billion under the EFF and $200 million under the RSF, taking total payouts under both facilities to $3.3 billion.

The IMF described the recent rise in inflation as temporary, driven mainly by flood-related disruptions, and stressed that Pakistan must maintain consistent and credible macroeconomic policies to protect stability.

Expanding the tax base and simplifying the tax system should be top priorities, the Fund said, adding that improvements in data quality, statistics and governance were essential for long-term resilience.

The lender also highlighted the need for structural reforms in public accounts, state-owned enterprises and the energy sector. Timely power tariff adjustments could help curb circular debt, while better energy-sector performance was vital for competitiveness, it noted.

The report directed the State Bank of Pakistan to enhance transparency and flexibility in the foreign exchange market.

The IMF said the recent floods underscored the urgency of climate-focused reforms, including improved water management and stronger disaster preparedness. It added that private-sector-led growth would be key to driving Pakistan’s economic recovery.