Islamabad: In a significant policy shift, Pakistan’s federal government has introduced a new method for tracking climate-related expenditures in its upcoming fiscal budget for 2025–26 — a move driven by conditions set by the International Monetary Fund (IMF).
According to sources in the Ministry of Finance, starting July 1, all public spending related to environmental and climate issues will be clearly identified and categorized. This includes tagging climate-related elements within subsidies and grants, making it easier to monitor and report such expenses.
The ministry has already issued instructions to all relevant federal ministries and divisions, asking them to submit their budget estimates by May 30. They’ve also been given an additional reporting form — Form 3C — to help integrate the new tagging mechanism.
Officials confirmed that this initiative is part of the IMF’s $7 billion loan program, which requires Pakistan to improve transparency in climate spending. The IMF has previously advised Pakistan to invest at least 1% of its annual GDP — roughly over Rs1.24 trillion based on current estimates — in climate resilience and adaptation measures.
Such investment, the IMF believes, is essential for preparing the country to deal with increasingly severe weather events, particularly the rising risk of devastating floods. It could also help safeguard economic growth and reduce inequality.
In its assessment, the IMF stated that targeted spending on climate-resilient infrastructure can reduce the long-term economic impact of natural disasters by up to one-third and enable faster, more inclusive recovery.