IMF approves $1 billion tranche for Pakistan under extended fund facility

The International Monetary Fund has approved the release of a $1 billion loan for Pakistan under the Extended Fund Facility (EFF), marking the second installment under the country’s $7 billion loan program, sources in the Ministry of Finance said Friday.

The approval comes despite India’s reported attempt to block the disbursement, a request that the IMF rejected, according to officials familiar with the matter.

In addition to the latest tranche, the IMF has approved $1.3 billion in funding for climate change initiatives. The $1 billion will be disbursed immediately, while the climate-related funds will be allocated over the next 28 months.

With the latest approval, total disbursements under the EFF now stand at $2.1 billion, a development attributed to Pakistan’s improved fiscal performance, officials said.

As part of the conditions attached to the new financing, Pakistan will introduce a carbon levy starting in July and increase water usage charges beginning next year. The government has also agreed to conduct a study on phasing out existing Special Economic Zones (SEZs) by 2035.

The IMF delegation, led by Nathan Porter, held discussions in Karachi and Islamabad from Feb. 24 to March 14, followed by virtual meetings, to evaluate Pakistan’s economic performance under the EFF and Resilience and Sustainability Facility (RSF).

The staff-level agreement reached in March outlines a broader economic strategy endorsed by federal and provincial authorities.

The IMF said the program aims to build on the macroeconomic stability Pakistan has achieved over the past year, focusing on fiscal reforms, inflation control, strengthening external reserves, and eliminating economic distortions to boost private-sector-led growth.