Great news for Pakistan’s economy! The International Monetary Fund’s (IMF) Executive Board has officially given its nod, approving the disbursement of a significant $1.2 billion for the nation. This vital funding comes under two key facilities: the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF), providing a much-needed boost as Pakistan navigates complex economic challenges.
What Does This Mean for Pakistan?
The approved tranche includes roughly $1 billion from the EFF and an additional $200 million via the RSF. This isn’t just a new infusion of cash; it marks the completion of the second review of Pakistan’s economic reform programme under the EFF and the first review under the RSF. With this approval, the total disbursements under both arrangements now stand at approximately $3.3 billion, a testament to Pakistan’s ongoing reform efforts.
The IMF highlighted that Pakistan’s policy efforts under the EFF have been instrumental in stabilizing the economy and rebuilding confidence, especially amidst a challenging global environment and the severe floods the country recently endured. Key achievements noted include:
- Strong Fiscal Performance: A primary surplus of 1.3 percent of GDP was achieved in FY25, meeting set targets.
- Rising Reserves: Gross reserves have climbed to $14.5 billion at the end of FY25, a significant increase from $9.4 billion a year prior, with projections for continued growth.
- Inflation Management: While inflation increased due to flood impacts on food prices, it’s expected to be temporary.
The Path Forward: IMF’s Recommendations
Following the Executive Board discussion, Mr. Nigel Clarke, Deputy Managing Director and Acting Chair, emphasized the importance of sustained prudent policies and accelerated reforms. His statement outlined several critical areas for Pakistan:
1. Macroeconomic Stability & Fiscal Credibility
- Maintaining the FY2026 primary balance target while accommodating relief needs for flood victims.
- Advancing reforms to raise revenues through tax policy simplification and base broadening to achieve fiscal sustainability.
2. Monetary Policy & Financial Sector
- Maintaining an appropriately tight monetary policy stance to keep inflation anchored within the SBP’s target range.
- Deepening the interbank foreign exchange market and allowing exchange rate flexibility.
- Ensuring decisive financial regulation enforcement for a sound financial sector.
3. Energy Sector Reforms
- Accelerating reforms to safeguard the sector’s viability and improve competitiveness.
- Focusing on sustainably reducing electricity production and distribution costs and addressing inefficiencies.
4. Structural Reforms & Governance
- Continuing efforts to unlock growth potential and attract private investment.
- Implementing governance reforms, including SOE governance and privatization, and enhancing the business environment.
- A welcome step: The publication of the Governance and Corruption Diagnostic report, which suggests Pakistan could boost growth by up to 6.5% over five years with a 15-point reform plan.
5. Climate Resilience
- The RSF arrangement supports efforts to reduce Pakistan’s vulnerability to extreme weather events, which was clearly underscored by recent floods. This includes strengthening disaster response, improving water resource use, and integrating climate considerations into budgeting and financing decisions.
This approval follows intensive discussions between an IMF team and Pakistani authorities from September 24-October 8, 2025, and a staff-level agreement reached on October 15. While the diagnostic report on governance highlighted systemic gaps and prompted calls for accountability, Finance Minister Muhammad Aurangzeb stated that several recommendations are already being implemented.
This $1.2 billion tranche is more than just money; it’s a vote of confidence in Pakistan’s reform agenda and a critical step towards achieving stronger, more sustainable, and private sector-led medium-term growth. The road ahead requires continued commitment, but with this support, Pakistan is better equipped to navigate its economic journey.
Source: Original Article
