IMF clears USD 1.2 billion disbursements for Pakistan, citing strong progress in economic reforms

KARACHI: The International Monetary Fund (IMF) has approved an immediate disbursement of USD1 billion to Pakistan under the Extended Fund Facility (EFF) and around USD 200 million under the Resilience and Sustainability Facility (RSF), bringing total disbursements to nearly USD 1.2 billion.

The decision follows the IMF Executive Board’s completion of the second review of the EFF and the first review of the RSF, acknowledging Islamabad’s continued commitment to reforms despite recent economic and climate-related shocks.

IMF press statement says “Today the Executive Board of the International Monetary Fund (IMF) completed the second review of Pakistan’s economic reform program supported by the EFF and the first review of Pakistan’s program supported by the RSF. This decision allows for an immediate disbursement of around USD 1 billion (SDR 760 million) under the EFF and around USD 200 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about USD 3.3 billion (SDR 2,434 billion).”

According to the IMF, Pakistan’s policy efforts under the EFF have yielded significant progress, helping stabilize the economy and restore investor confidence amid a difficult global environment and the severe floods that struck the country recently.

It said, “Pakistan’s policy efforts under the EFF have delivered significant progress in stabilizing the economy and rebuilding confidence amid a challenging global environment and recent severe floods.”

The Fund noted that fiscal performance remained strong, with Pakistan achieving a primary budget surplus of 1.3 percent of GDP in FY25, consistent with agreed targets. It added that inflation has risen due to flood-induced food price pressures, though this spike is expected to be temporary.

“Fiscal performance has been strong, with a primary surplus of 1.3 per cent 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.” noted IMF release.

Highlighting improvement in external buffers, the IMF confirmed that Pakistan’s gross foreign exchange reserves reached USD14.5 billion at the end of FY25, compared to USD9.4 billion a year earlier, and are projected to further strengthen in FY26 and beyond.

The IMF emphasized that continued prudent policy measures, structural reforms, and climate-resilience initiatives remain essential for securing sustainable growth and reducing vulnerabilities.

Nigel Clarke, Deputy Managing Director and Acting Chair, of the IMF’s Executive Board noted, “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.”

Clarke said under an uncertain global environment, Pakistan needs to maintain prudent policies to further entrench macroeconomic stability, along with accelerated reforms to achieve stronger, private sector-led, and sustainable medium-term growth.

“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.” Clarke said. (ANI)