The IMF on Monday approved disbursements of about $1.2 billion to Pakistan, taking total flows to the country under the Extended Fund Facility and Resilience and Stability Facility to about $3.3 billion. The IMF Executive Board approved the payment during its meeting in Washington, citing the country’s efforts in macroeconomic reforms.Pakistan is heavily dependent 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 into a 10-year, $20 billion financing arrangement with the World Bank in January.
IMF Deputy Managing Director Nigel Clarke said the country’s policy implementation remained in line with the program’s goals, even as flooding during the recent monsoon season killed more than 1,000 people through September. The Board further said that the strength of the reform drive has helped maintain financial stability despite shocks and improving external conditions.Clark said, “The implementation of reforms in Pakistan has helped maintain 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 needed 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 FY2015, in line with program expectations. The IMF reported that gross reserves reached $14.5 billion at the end of FY2025, compared to $9.4 billion a year earlier, and are projected to increase in FY26 and beyond. The board acknowledged that inflation has increased due to increased food prices due to floods, but described the pressure as temporary.Clark warned that continued reform efforts will be necessary to secure private sector-led medium-term growth. He stressed the need to “pursue reforms to increase revenues through tax policy simplification and base broadening”, noting that fiscal flexibility is essential for investments in climate adaptation, social protection, human development and public infrastructure. He highlighted the energy sector as a priority, saying that “reforms in the energy sector are critical to safeguard its viability and improve Pakistan’s competitiveness”, and while electricity tariff adjustments have “helped reduce the stock and flow of circular debt”, subsequent steps should focus on reducing power generation and distribution costs and eliminating inefficiencies in both the power and gas sectors.The climate-related RSF tranche is intended to support Pakistan’s broader resilience and disaster-preparedness framework. Clark said he supports work to “strengthen natural disaster response and financing coordination, improve the use of scarce water resources, increase climate considerations in project selection and budgeting, and improve information on climate-related risks in financing decisions.” The board said the scale of the recent floods shows why climate reforms must be accelerated, Dawn reported, and noted that Pakistan is making progress on these fronts with the support of RSF.The IMF noted the publication of the Governance and Corruption Diagnostic Assessment, calling it “a welcome step to accelerate governance reforms”.
