The International Monetary Fund’s (IMF) Executive Board on Monday approved the disbursement of $1.2 billion for Pakistan under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).
The clearance unlocks about $1.2 billion, roughly $1 billion under the EFF and $200 million through the RSF.
“The Executive Board of the International Monetary Fund completed the second review of Pakistan’s economic reform programme supported by the EFF and the first review of Pakistan’s programme supported by the RSF. This decision allows for an immediate disbursement of around US$1 billion (SDR 760 million) under the EFF and around US$200 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about $3.3 billion (SDR 2,434 billion),” IMF said in a statement.
Pakistan’s policy efforts under the EFF have delivered significant progress in stabilising the economy and rebuilding confidence amid a challenging global environment and recent severe floods. Fiscal performance has been strong, with a primary surplus of 1.3 percent of GDP achieved in FY25, in line with targets. Inflation has increased, reflecting the impact of the floods on food prices, but this is expected to be temporary. Gross reserves stood at $14.5 billion at end-FY25, up from $9.4 billion a year earlier, and are projected to continue to be rebuilt in FY26 and over the medium term.
Following the Executive Board discussion, Mr Nigel Clarke, Deputy Managing Director and Acting Chair, made the following statement:
“Pakistan’s reform implementation under the EFF arrangement has helped preserve macroeconomic stability in the face of several recent shocks. Real GDP growth has accelerated, inflation expectations have remained anchored, and fiscal and external imbalances have continued to moderate. In the face of an uncertain global environment, Pakistan needs to maintain prudent policies to further entrench macroeconomic stability, while accelerating reforms necessary to achieve stronger, private sector-led, and sustainable medium-term growth.
“The authorities’ commitment to the FY2026 primary balance target while accommodating urgent relief needs in response to the recent severe floods is a strong signal of their commitment to build fiscal policy credibility. In parallel, advancing reforms to raise revenues via tax policy simplification and base broadening is key to achieving fiscal sustainability and building the fiscal space necessary to boost climate resilience, social protection, human capital development, and public investment.
“An appropriately tight monetary policy stance has been pivotal in reducing inflation and should be maintained to ensure inflation remains anchored within the SBP’s target range. Further improvements in central bank communication will support effective monetary policy implementation. The SBP should continue efforts to deepen the interbank foreign exchange market, while allowing exchange rate flexibility to absorb shocks. Decisive financial regulation enforcement is necessary to maintain a sound and adequately capitalised financial sector. At the same time, promoting capital market development will help expand the public and private sectors’ financing options.
“Accelerating reforms in the energy sector is critical to safeguarding its viability and improving Pakistan’s competitiveness. Timely implementation of power tariff adjustments has helped reduce the stock and flow of circular debt. Subsequent efforts need to focus on sustainably reducing electricity production and distribution costs and addressing inefficiencies in the power and gas sectors.
“Efforts to advance structural reforms should continue to unlock growth potential and attract high-impact private investment. To this end, the publication of the Governance and Corruption Diagnostic report is a welcome step in accelerating governance reforms. Additional efforts should focus on SOE governance reforms and privatization, enhancing the business environment, and improving economic data and statistics.
“Reducing Pakistan’s vulnerability to extreme weather events, which has been underscored by the recent floods, will enhance macroeconomic and fiscal sustainability. The RSF arrangement is supporting efforts to strengthen natural disaster response and financing coordination, improve the use of scarce water resources, raise climate considerations in project selection and budgeting, and improve the information on climate-related risks in financing decisions.”
An IMF team, led by Iva Petrova, held discussions during September 24-October 8, 2025, mission to Karachi and Islamabad, and in Washington, DC, for the second review under the Extended Fund Facility and the first review under the Resilience and Sustainability Facility.
On October 15, the Fund stated that the Pakistani authorities and IMF staff had reached a staff-level agreement on the second review under Pakistan’s EFF and the first review under RSF.
The board approval follows the release of the IMF’s Governance and Corruption Diagnostic Assessment, which identified systemic governance gaps and said Pakistan could raise growth by up to 6.5% over five years if it implements a 15-point reform plan.
IMF board expected to approve $1.2bn tranche for Pakistan by ‘early December’, says Aurangzeb
The findings prompted opposition calls for investigations into alleged governance failures. Khyber Pakhtunkhwa Chief Minister Mohammad Sohail Afridi also sought accountability, saying the report raised “grave questions” about the use of public resources and the diversion of funds abroad.
Finance Minister Muhammad Aurangzeb said the diagnostic should accelerate long-overdue reforms, adding that several recommendations were already being implemented.
