The International Monetary Fund has given the green light for approximately $1.3 billion in new financial assistance to Pakistan following the successful completion of essential program evaluations. This approval includes the third review of Pakistan’s Extended Fund Facility and the second review of its Resilience and Sustainability Facility, resulting in an immediate disbursement of around $1.1 billion and $220 million. The total disbursements under these two initiatives have now reached about $4.8 billion.
Pakistan’s economic stability and improved financing and external conditions have been attributed to its strong implementation of the IMF program, despite challenges such as the Middle East conflict. The program, initiated in September 2024, aims to enhance resilience and foster long-term growth through reforms focusing on fiscal stability, tax expansion, and the strengthening of public institutions.
Significant progress has been noted in Pakistan’s fiscal performance, with an expected primary surplus of 1.6% of GDP in the fiscal year 2026. Additionally, foreign reserves have seen an increase, rising from $14.5 billion in June 2025 to $16 billion by the end of December. However, inflation has also risen due to elevated global commodity prices impacting domestic energy costs.
IMF Deputy Managing Director Nigel Clarke commended Pakistan’s robust program implementation under the EFF arrangement, emphasizing its role in supporting macroeconomic stability and the restoration of fiscal and foreign exchange buffers. While highlighting positive indicators such as accelerated GDP growth and contained inflation, Clarke cautioned about existing risks in the current uncertain external environment following the Middle East conflict.
Maintaining fiscal discipline was underscored by the IMF, with a focus on Pakistan’s commitment to achieving primary balance targets for fiscal years 2026 and 2027 to enhance fiscal sustainability and policy credibility. The IMF also emphasized the importance of Pakistan’s central bank maintaining a tight monetary policy stance to anchor inflation expectations and the necessity of energy reforms to ensure cost-reflective pricing while safeguarding vulnerable households.
Furthermore, the IMF stressed the need for comprehensive structural reforms, including the privatization of state-owned enterprises and intensified anti-corruption measures. The Resilience and Sustainability Facility program, with a climate focus, aims to bolster disaster response, water management, and climate risk mitigation in Pakistan, which has been vulnerable to external shocks like global commodity fluctuations and regional tensions.
