IMF grants $1.2bn to Pakistan after powerful 7-point review approval24

IMF Grants Fresh $1.2bn Tranche to Pakistan: What It Means for the Economy

The recent announcement that IMF grants Pakistan another major disbursement has sparked fresh debate about the country’s economic direction. This marks another step in Pakistan’s long and complicated journey toward financial stability.

The IMF Executive Board met in Washington this week and concluded its latest review of Pakistan’s economic performance. Once again, the Fund noted that Pakistan has pushed forward with its reform roadmap despite enormous challenges. Floods destroyed crops, inflation has climbed, and global markets remain unpredictable — yet the government’s efforts have kept the economy from drifting off course. Thanks to this continued push, the IMF grants approval for Islamabad to draw $1 billion under the EFF and $200 million under the RSF.

This isn’t just a financial transaction. It is a message from the IMF that Pakistan’s recent performance is moving in the right direction. The Fund acknowledged that Pakistan’s policies have stabilised core indicators and built modest but meaningful confidence in future recovery.

Why the IMF’s Approval Matters Right Now

The IMF Executive Board stated that Pakistan’s strong programme implementation helped maintain stability even after the severe floods.

Pakistan’s economy has gone through repeated cycles of uncertainty. Currency volatility, trade gaps, and rising global energy prices have made policymaking extremely difficult. But this time, authorities have shown more discipline, and that has encouraged the IMF to keep supporting the reform path.

IMF’s Priorities for Pakistan Going Forward

While approving the funds, the IMF made it clear that Pakistan must keep its economic reforms on track. The IMF grants approval comes with expectations — and these expectations are designed to build long-term economic strength rather than quick fixes.

Key priorities include:

1. Keep Monetary Policy Tight

 The floods pushed food prices up, and until things settle, the government must hold a firm stance.

2. Strengthen the Tax System

The Fund wants Pakistan to simplify taxes and widen the tax base. This means reducing loopholes, increasing documentation, and making sure more sectors contribute.

3. Improve Governance

The IMF welcomed Pakistan’s recent Governance and Corruption Diagnostic Assessment. This kind of transparency is essential for investor confidence — one reason the IMF grants continued support.

4. Reform State-Owned Enterprises (SOEs)

Electricity companies, gas utilities, and other public-sector entities drain billions every year. The IMF wants Pakistan to adopt a more efficient model with clearer accountability and, where possible, privatisation.

5. Energy Sector Fixes

Circular debt has long been a major issue. Timely power tariff adjustments helped reduce some of the burden, but long-term solutions — lowering production costs and fixing inefficiencies — are essential.

The Role of the RSF (Resilience and Sustainability Facility)

Part of the new IMF grants package includes $200 million under the RSF. This portion is specifically focused on climate adaptation — something Pakistan desperately needs after experiencing record-breaking floods.

Under the RSF agenda, Pakistan is working to:

• Improve climate-related budgeting

• Strengthen disaster response systems

• Enhance water resource management

• Integrate climate risk into financial planning

These steps are vital because Pakistan has been among the top countries affected by climate disasters. The IMF recognises this and wants to ensure that the funds support resilience, not just immediate relief.

What the IMF’s Deputy Managing Director Said

Nigel Clarke, the IMF Deputy Managing Director, noted that despite global uncertainty, Pakistan must continue responsible policies. He emphasised that maintaining stability, boosting revenues, and enabling private-sector-led growth are essential.

He explained that IMF grants are meant to help Pakistan stay committed to reforms that will generate a more competitive, productive, and inclusive economy.

The economy is far from fully stable, but the government has shown real commitment to difficult reforms. The IMF recognises that effort — which is why the IMF grants approval for another tranche, offering both financial support and confidence to global markets.

Pakistan now has an opportunity to keep building momentum.