More funding for Pakistan! IMF gives green signal to $1.2 billion tranche; cites ‘macroeconomic stability’

IMF on Monday approved a disbursement of around $1.2 billion to Pakistan, lifting the country’s total inflows under the Extended Fund Facility and the Resilience and Sustainability Facility to roughly $3.3 billion. The IMF Executive Board cleared the payment during its meeting in Washington, citing the country’s efforts in macroeconomic reforms.

Pakistan remains heavily reliant on external financing. The country narrowly avoided default in 2023, helped by a $7 billion IMF bailout in 2024, and is now one of the Fund’s biggest borrowers after Argentina and Ukraine. It also entered a 10-year, $20 billion financing arrangement with the World Bank in January.


IMF deputy managing director Nigel Clarke said that the country’s policy implementation had remained consistent with programme goals, even after floods during the recent monsoon season killed more than 1,000 people by September.

The Board further added that the strength of the reform drive had helped maintain financial stability and improve external conditions despite the shock.

Clarke said "the implementation of reforms in Pakistan has helped to preserve macroeconomic stability despite recent shocks".

Pointing to summer floods in the country, the IMF said, "the authorities' commitment to meeting their primary balance target while providing the necessary emergency assistance in response to these severe floods is an important signal of their willingness to strengthen their credibility in fiscal policy".

As part of the review, the Fund highlighted Pakistan’s fiscal performance, noting a primary surplus of 1.3% of GDP in FY25, in line with programme expectations. The IMF reported that gross reserves reached $14.5 billion at the end of FY25, compared with $9.4 billion a year earlier, and are forecast to expand through FY26 and beyond, the Dawn reported. The Board acknowledged that inflation had risen due to flood-driven food price spikes but described the pressure as temporary.

Clarke warned that a sustained reform effort would be necessary to secure medium-term growth that is led by the private sector. He emphasised the need “advancing reforms to raise revenues via tax policy simplification and base broadening”, noting that fiscal resilience is essential for investments in climate adaptation, social protection, human development and public infrastructure.

He further underlined the energy sector as a priority, stating that “reforms in the energy sector are critical to safeguarding its viability and improving Pakistan’s competitiveness”, and that while power tariff adjustments had “helped reduce the stock and flow of circular debt”, subsequent steps must focus on lowering electricity production and distribution costs and addressing inefficiencies in both the power and gas sectors.

The climate-related RSF tranche is aimed at supporting Pakistan’s wider resilience and disaster-preparedness framework. Clarke said it backs work 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”. The Board said the scale of the recent floods demonstrates why climate reforms must be accelerated, and reported that Pakistan is making progress on these fronts with RSF support, the Dawn reported.

The IMF noted the publication of the Governance and Corruption Diagnostic Assessment, describing it as “a welcome step in accelerating governance reforms”.


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