IMF board approves $1.3B loan tranche for Pakistan

The International Monetary Fund’s (IMF) Executive Board has approved a disbursement of $1.29 billion for Pakistan and credited the authorities for maintaining economic stability.

The Executive Board reviewed the staff-level agreement reached in October and cleared a $1.09 billion tranche under Pakistan’s existing Extended Fund Facility (EFF). The IMF also approved the first $200 million tranche from the Resilience and Sustainability Facility (RSF), which supports Pakistan’s climate-related initiatives.

Pakistan has now received the third tranche under the EFF program, which began in September 2024 and spans 37 months. The first $1 billion disbursement was made in September 2024, followed by a second $1 billion tranche in May.

The IMF said the $200 million RSF climate-related tranche is expected to be transferred to Pakistan within the next few hours.

According to officials, the fresh tranche will be used to support macroeconomic stability, climate-related commitments under the RSF, and broader structural reforms previously agreed with the IMF.

In its statement, the Fund said Pakistan has shown "significant progress" in stabilizing the economy under the IMF program despite a challenging global environment and recent floods.

The Fund notes the primary surplus in FY25, which is equivalent to 1.3% of GDP.

According to official data, Pakistan has posted a primary surplus of PKR 2.7 trillion ($9.7 billion) in FY25. This was the second consecutive year of surplus and the largest on record.

The IMF added that even though inflation has increased — due to the impact of the floods — it is expected to be temporary. Gross reserves stood at $14.5 billion at the end of FY25, up from $9.4 billion a year earlier.

IMF Deputy Managing Director Nigel Clarke has said Pakistan’s reforms under the EFF arrangement have "helped preserve macroeconomic stability in the face of several recent shocks".

"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," Clarke added.

IMF, Pakistan and fragile reforms

The IMF approved a $ 7 billion loan program for Pakistan in September last year, with the goal of helping the country rebuild macroeconomic resilience, stabilise its external finances, broaden the tax base, and reform state-owned enterprises. According to the IMF, initial policy implementation showed progress, with Pakistan achieving improved fiscal discipline, a primary surplus, falling inflation, and strengthening reserves.

The IMF holds periodic reviews to assess Pakistan's compliance with the structural benchmarks. After a successful review, the Fund disburses the loan tranche.

Recently, Pakistan introduced new rules that mandate public officials in grades 17 and above to disclose their assets as part of its commitment to the IMF.

The government has also assured the Fund of major anti-corruption and governance reforms over the next six to 18 months.

Under the commitments, Pakistan will overhaul its public procurement framework within 12 months by ending preferential treatment for state-owned enterprises, eliminating avenues for direct contracting and mandating use of the e-government procurement system for all transactions.