Emerging climate risks & IMF

THERE is no bigger threat to Pakistan’s macroeconomic and financial stability than climate shocks. Around this time last year, we were hit by floods costing $30 billion that have derailed economic growth and development. This sad fact was not lost on the International Monetary Fund (IMF). It has now integrated climate risks as a touchstone in all its lending operations. The staff-level Stand-by Agreement (SBA) with Pakistan is no exception, even if it is not always publicly recognised. The key conditions of SBA include doing away with heavy subsidies on energy, strengthening public debt sustainability, implementing a market-based exchange rate system, increasing tax revenue, improving governance and reducing corruption, reforms in the energy sector and, finally, climate resilience. The last one of these commitments seems innocuous, perhaps out of place. In reality, this will potentially pose a very serious threat to the compliance and adherence of other areas of action. The dark clouds of the monsoons have already begun to gather on the horizon.