IMF's Executive Board approves $1.32bn financing for Pakistan

ISLAMABAD: The International Monetary Fund (IMF) Executive Board on Friday approved Pakistan’s third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF), allowing access to approximately USD1.32 billion.

The approval was given at a meeting of the IMF Executive Board held in Washington, DC on Friday.

This decision allows for an immediate disbursement of around $1.1 billion (SDR 760 million) under the EFF arrangement and around $220 million (SDR 154 million) under the RSF arrangement, bringing total disbursements under the two arrangements to about $4.8 billion (SDR 3.348 billion).

READ MORE: IMF Board to review EFF, RSF on May 8

Pakistan’s 37-month EFF arrangement was approved on September 25, 2024, and aims to build resilience and enable sustainable growth. Key priorities include:

(i) entrenching macroeconomic stability through consistent implementation of sound macro policies, including rebuilding international reserve buffers and broadening the tax base;

(ii) advancing reforms to strengthen competition and raise productivity and competitiveness;

(iii) reforming SOEs and improving public service provision, developing human and physical capital by expanding health, education, and social protection spending, restoring energy sector viability, and intensifying anti-corruption efforts.

As per the IMF, the 28-month RSF arrangement approved on May 9, 2025, reforms prioritise:

(i) building resilience to natural disasters and strengthening public investment processes at all levels of government;

(ii) making scarce water resource usage more efficient, including through better pricing;

(iii) strengthening federal-provincial coordination of natural disaster response;

(iv) improving the information architecture for, and disclosure of, climate-related risks by banks and corporates; and

(v) supporting Pakistan’s efforts to meet its mitigation commitments and reduce related macro-critical risks.

“Pakistan’s strong program implementation under the EFF arrangement has continued, which has supported macroeconomic stability and the rebuilding of fiscal and foreign exchange buffers,” said Nigel Clarke, Deputy Managing Director and Acting Chair.

He said that the GDP growth had accelerated, inflation remained contained, and the current account was broadly balanced in the first nine months of FY26.

“Amid a more challenging and highly uncertain external environment since the onset of the war in the Middle East, Pakistan needs to maintain strong macroeconomic policies while accelerating reform efforts, which are critical to managing further shocks and fostering higher sustainable medium-term growth.”

“The authorities’ commitment to the FY26 and FY27 primary balance targets will help strengthen fiscal sustainability and policy credibility.

Gradual fiscal consolidation remains appropriate to strengthen resilience and should be supported by continued efforts to boost revenue mobilization—through broadening the tax net and improving compliance—and strengthen spending efficiency and public financial management, he added.

“These efforts would also create space for scaling up social assistance, human capital development, and productive public investment, while addressing tax policy distortions.”

Clarke added that the State Bank of Pakistan had acted proactively to maintain an appropriately tight monetary policy stance aimed at keeping inflation expectations anchored and should continue to carefully monitor potential second-round effects on domestic prices, wages, and expectations. “Exchange rate flexibility should be the main shock absorber, particularly given the need to continue rebuilding reserves.

Efforts to deepen the FX market should continue, including through a carefully sequenced medium-term FX liberalisation,” he further said.

He added that proactive efforts to support financial stability remain important, including ensuring all banks continue to be adequately capitalised, and addressing microfinance banks’ capital shortfalls.

“In an environment of high and volatile commodity prices, recent improvements in energy sector finances need to be sustained by keeping domestic fuel, electricity, and gas prices in line with costs, while protecting the most vulnerable consumers with targeted support. Continued reform efforts to reduce costs and address inefficiencies will safeguard the sector’s viability and improve Pakistan’s competitiveness.

“Advancing and deepening structural reforms is essential to generate sustainable economic growth and attract high-impact private investment. Efforts should continue to deliver on the Economic Governance Reform actions aimed at bolstering anti-corruption institutions. Other priorities include completing SOE reforms and privatisation, and enhancing the business environment by eliminating distortions and unnecessary regulations.

“Reducing Pakistan’s vulnerability to climate shocks will enhance macroeconomic and fiscal sustainability. Reforms supported by the RSF are helping to strengthen natural disaster response and financing coordination, improve the use of scarce water resources, reflect climate considerations in project selection and budgeting, and improve the climate information architecture.”

The development follows a staff-level agreement reached on March 27 between IMF staff, led by Iva Petrova, and Pakistani authorities after detailed policy discussions held in Karachi and Islamabad from February 25 to March 2 and subsequently through virtual engagements.

Copyright Business Recorder, 2026