Washington, D.C. – The International Monetary Fund (IMF) has approved a new disbursement of approximately $1.2 billion to Pakistan under its dual-track bailout programme, which includes the 37-month Extended Fund Facility (EFF) and the climate-focused Resilience and Sustainability Facility (RSF). The IMF Executive Board made the decision on Monday, acknowledging Pakistan’s implementation of its reform programme despite significant domestic and global challenges.

Breakdown of the Disbursement

• $1 billion will be drawn under the EFF, which focuses on macroeconomic stabilization and structural reforms.
• $200 million will come from the RSF, aimed at supporting Pakistan’s climate adaptation and disaster resilience initiatives.

This tranche is part of a broader IMF support framework, which now totals approximately $3.3 billion in disbursements under the EFF and RSF combined. These funds are intended to bolster both short-term economic stability and long-term structural reforms.

IMF’s Assessment of Pakistan’s Economic Performance

The IMF Executive Board highlighted several key achievements in Pakistan’s economic management:

1. Stability Amid Crises: Despite the devastating floods in 2025 and a challenging global environment, Pakistan maintained macroeconomic stability, improved external financing conditions, and strengthened investor confidence.
2. Fiscal Performance: Pakistan recorded a primary surplus of 1.3% of GDP for FY25, meeting the targets set under the IMF programme. Gross foreign exchange reserves rose to $14.5 billion by the end of FY25, up from $9.4 billion a year earlier.
3. Inflation: The IMF noted that inflation had risen, largely due to flood-induced increases in food prices, but projected these effects to be temporary.
4. Policy Priorities: The board emphasized the importance of continuing reforms in:

• Public finances to improve fiscal sustainability.
• Competition and productivity to enhance private-sector-led growth.
• State-owned enterprises (SOEs) for better governance and efficiency.
• Energy sector reforms to reduce circular debt and improve cost-efficiency.
• Social safety nets and human capital development to protect vulnerable populations.

Statements from IMF Leadership

IMF Deputy Managing Director and Acting Chair Nigel Clarke highlighted the need for sustained prudent policies. He emphasized:

• Simplifying tax policies and broadening the tax base as critical steps for fiscal sustainability.
• Accelerating energy sector reforms, including tariff adjustments and efficiency improvements, to enhance Pakistan’s global competitiveness.
• Strengthening governance and anti-corruption measures, particularly in SOEs, to attract private investment and ensure effective public service delivery.

Clarke also noted that the RSF tranche specifically supports initiatives such as:

• Strengthening natural disaster response and financing coordination.
• Improving management of scarce water resources.
• Integrating climate considerations into budgeting and project selection.
• Enhancing information on climate-related financial risks.

Progress on Structural Reforms

The IMF welcomed Pakistan’s publication of the Governance and Corruption Diagnostic Assessment, describing it as an important step toward accelerating governance reforms. Other structural reforms highlighted include:

• SOE governance and privatization to increase efficiency.
• Business environment enhancements to attract private sector investment.
• Energy and public service reforms to ensure sustainable service delivery and reduce costs.

The board emphasized that these reforms are essential not only for stabilizing the economy but also for unlocking long-term growth potential.

Strategic Implications of the Tranche

The $1.2 billion tranche is expected to:

• Provide breathing space for debt servicing and external obligations.
• Bolster import cover to stabilize trade and supply chains.
• Support critical infrastructure investments, particularly in water management and climate adaptation under the RSF framework.

Officials in Islamabad described the disbursement as a vote of confidence in Pakistan’s reform agenda but stressed that translating IMF commitments into tangible economic recovery remains the ultimate challenge

Analyst Commentary

Experts noted that Pakistan’s future economic resilience will depend on:

• Continued discipline in fiscal and monetary policies.
• Effective governance reforms in SOEs and public institutions.
• Strengthening climate adaptation mechanisms to mitigate the impact of recurrent natural disasters.
• Efficient utilization of IMF funds to support private-sector-led, sustainable growth.

The IMF’s endorsement comes against a backdrop of global challenges, including commodity-price volatility, tight financial conditions, and climate-related disruptions, making the tranche both a financial lifeline and a signal that disciplined reforms can strengthen Pakistan’s economic foundations.

Summary:
The IMF’s approval of the $1.2 billion tranche represents a critical milestone for Pakistan’s economic stabilization and reform efforts. While short-term relief is provided through liquidity support, the success of these measures hinges on effective governance, fiscal discipline, energy sector reforms, and climate resilience initiatives.