IMF Sanctions $1.2 Billion for Pakistan to Bolster Economic Stability

The IMF has approved nearly $1.2 billion in financial aid to Pakistan, recognizing its persistent reforms amidst diverse challenges. This support aims to stabilize the economy, rebuild confidence, and address climate impacts, while emphasizing ongoing structural reforms and prudent policies for sustainable growth.

The International Monetary Fund (IMF) has sanctioned an immediate release of $1 billion to Pakistan under its Extended Fund Facility (EFF) and about $200 million via the Resilience and Sustainability Facility (RSF), totaling nearly $1.2 billion. This approval follows the IMF Executive Board's successful review of both economic programs, acknowledging Pakistan's consistent reform efforts despite economic and climate tribulations.

As per the IMF statement, the completion of these reviews allows for these disbursements, thus accumulating total disbursements under both facilities to approximately $3.3 billion. The Fund highlighted Pakistan's policy efforts under the EFF, which have led to significant milestones in economic stabilization and investor confidence restoration amidst external and natural challenges.

Fiscal performance in Pakistan has been robust, achieving a primary budget surplus of 1.3% of GDP in FY25, aligning with targets. Despite inflation spikes due to food price pressures from recent floods, these are projected as temporary. The IMF noted improvements in external buffers, with foreign reserves rising significantly. Continued policy diligence, structural reforms, and climate-resilience initiatives are deemed critical for sustained growth and risk mitigation.

Nigel Clarke, Deputy Managing Director and Acting Chair of the IMF's Executive Board, praised Pakistan's reform actions for maintaining macroeconomic stability amidst recent shocks. He emphasized the necessity for sustained prudent policies and accelerated reforms, especially in the energy sector, to ensure medium-term growth and competitiveness. Timely adjustments in power tariffs have been pivotal in managing circular debt, but future efforts need to enhance electricity sector efficiency and cost reduction.

(With inputs from agencies.)