IMF recommends Pakistan invest 1% of GDP in climate resilience

The international lender emphasizes investment in adaptation to combat extreme weather impacts and enhance economic stability.

The International Monetary Fund (IMF) has called on Pakistan to allocate annually over Rs1.24 trillion, or 1% of its GDP, towards climate resilience and adaptation measures. 

According to the global lender, this investment aims to counteract the economic disruptions caused by extreme weather events and to foster sustainable economic growth while addressing social inequalities.

During a special policy briefing, the IMF outlined the dual benefits of ongoing economic reforms and proactive climate investment. Initiatives under the Extended Fund Facility (EFF), including adjustments in fiscal policies, labor markets, trade, and state-owned enterprises, are projected to increase Pakistan’s GDP growth by 2% over the next five years and significantly cut down inequality.

Investing in climate-adaptive infrastructure is emphasized as a critical strategy that could slash the detrimental effects of natural disasters by a third, thereby facilitating a quicker and more robust recovery from such events.

The Fund also detailed that the proposed infrastructure investments would bolster Pakistan’s resilience against climate-related shocks, which have been a recurring challenge for the nation. 

The IMF highlighted the effectiveness of enhancing public investment efficiency through the Climate-Public Investment Management Assessment (C-PIMA) Action Plan. This approach not only strengthens immediate disaster responses but also supports long-term economic stability.

Further discussions on financing these initiatives are expected during the upcoming IMF and World Bank annual meetings. Although these investments may initially increase debt levels, the IMF advocates for fiscal consolidation and structural reforms to maintain fiscal space and manage potential shocks.

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