Islamabad, Oct 17: IMF Advises Pakistan to Spend 1% of its GDP Against Climate Shocks
The International Monetary Fund (IMF) has recommended that Pakistan allocate 1% of its GDP annually to safeguard against climate-related risks, such as extreme weather events. In a report addressing specific issues within the country, the IMF suggested that this funding would be directed toward climate adaptation infrastructure, while maintaining the current levels of public investment.
Around 40% of this additional spending would be financed through concessional loans, with the remainder covered by domestic borrowing, aligning with Pakistan’s existing debt framework.
The IMF highlighted that adaptation investments offer higher returns compared to traditional investments, which would minimize the negative effects on GDP, private consumption, and private investment by about one-third to one-half in the event of a climate shock.
Pakistan’s GDP is projected to return to its normal level within five years after such a shock.
The IMF stressed that these investments would reduce the economic impact of natural disasters and enable a quicker recovery.
It also noted that increasing the efficiency of public investments, as per the C-PIMA Action Plan, would strengthen the country’s resilience, especially in the immediate aftermath of a shock. However, these efforts would result in a slight increase in Pakistan’s debt levels.
