The International Monetary Fund (IMF) Executive Board on Monday approved the release of $1.2 billion for Pakistan under two major programmes — the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). The disbursement includes $1 billion under the EFF and $200 million under the RSF, bringing total releases under these arrangements to $3.3 billion.
In its statement, the IMF confirmed that Pakistan has made significant progress in stabilising its economy despite global challenges and the devastating effects of recent floods. The country recorded a primary surplus of 1.3% of GDP in FY25, meeting programme targets. Inflation, though elevated due to flood-related food supply shocks, is expected to ease. Foreign exchange reserves have risen to $14.5 billion, up from $9.4 billion the previous year, with further improvement projected in FY26.
Following the Board’s review, IMF Deputy Managing Director Nigel Clarke praised Pakistan’s continued reform momentum, noting that economic stability has strengthened, GDP growth has accelerated, and fiscal and external pressures have eased. He emphasised the need for Pakistan to maintain prudent monetary and fiscal policies amid global uncertainty.
Clarke stressed several key areas for continued reform:
- Fiscal discipline: Pakistan must adhere to the FY2026 primary balance target while addressing urgent flood-related needs.
- Tax reforms: Simplifying tax policies and broadening the tax base is crucial for long-term sustainability.
- Monetary stability: A tight monetary policy remains essential to keep inflation within the State Bank of Pakistan’s target range.
- Energy sector reforms: Reducing circular debt, managing tariff adjustments, and fixing inefficiencies in power and gas sectors are critical.
- Structural reforms: Improvements in SOE governance, privatization efforts, better economic data, and an enhanced business environment are necessary to unlock investment and growth.
- Climate resilience: With Pakistan highly vulnerable to climate disasters, RSF-supported initiatives focus on better disaster financing, water management, climate budgeting, and climate-risk transparency.
The IMF’s approval follows a successful staff-level agreement reached in October after a review mission in Karachi, Islamabad, and Washington.
A major development tied to the programme was the release of the IMF’s Governance and Corruption Diagnostic Assessment, which highlighted deep governance gaps and suggested Pakistan could boost growth by up to 6.5% over five years by implementing a 15-point reform plan. The findings triggered opposition calls for accountability, with KP Chief Minister Mohammad Sohail Afridi citing “grave questions” about resource use and alleged illicit transfers abroad.
Finance Minister Muhammad Aurangzeb welcomed the diagnostic report, saying it provides a strong push for long overdue reforms, many of which are already underway.
The approval aligns with earlier remarks by Aurangzeb, who had said the IMF board would likely finalise the tranche by early December — a prediction that has now been fulfilled.
