IMF approved $1 billion for Pakistan under EFF Arrangement

ISLAMABAD, May 10 (APP/DNA):The Executive Board of the International Monetary Fund (IMF) has approved $billion tranche for Pakistan under Extended Fund Facility (EFF) and approved an arrangement under the Resilience and Sustainability Facility (RSF), with access of about $1.4 billion.

According to a press release issued by the fund, the IMF Executive board completed the first review of Pakistan’s economic reform program supported by the EFF Arrangement.

This decision allows for an immediate disbursement of around $1 billion bringing total disbursements under the arrangement to about $2.1 billion.

The IMF Executive Board also approved an arrangement under the Resilience and Sustainability Facility (RSF), with access of about $1.4 billion, it added.

It said that Pakistan’s 37-month EFF was approved on September 25, 2024, and aims to build resilience and enable sustainable growth.

The key priorities included entrenching macroeconomic sustainability through consistent implementation of sound macro policies, including rebuilding international reserve buffers and broadening of the tax base, and advancing reforms to strengthen competition and raise productivity and competitiveness.

Besides, reforming SOEs and improving public service provision and energy sector viability; and building climate resilience.

Pakistan’s policy efforts under the EFF have already delivered significant progress in stabilizing the economy and rebuilding confidence, amidst a challenging global environment.

Fiscal performance has been strong, with a primary surplus of 2.0 percent of GDP achieved in the first half of FY25, keeping Pakistan on track to meet the end-FY25 target of 2.1 percent of GDP.

Inflation fell to a historic low of 0.3 percent in April, and progress on disinflation and steadier domestic and external conditions, have allowed the State Bank of Pakistan to cut the policy rate by a total of 1100 bps since June 2025.

Gross reserves stood at $10.3 billion at end-April, up from $9.4 billion in August 2024, and are projected to reach $13.9 billion by end-June 2025 and continue to be rebuilt over the medium term.

The RSF will support the authorities’ efforts to reduce vulnerabilities to natural disasters and to build economic and climate resilience.

The program prioritizes resilience to natural disasters and strengthen public investment processes at all levels of government and makes the use of scarce water resources more efficient, including through better pricing, besides strengthens coordination of natural disaster response and financing between federal and provincial governments.

The RSF also aims at to improve the information architecture, for and disclosure of, climate-related risks by banks and corporates; and supports Pakistan’s efforts to meet its mitigation commitments and reduce related macro-critical risks.

Following the Executive Board discussion, Nigel Clarke, Deputy Managing Director in a statement  said that Pakistan has made important progress in restoring macroeconomic stability despite a challenging environment.

Since the approval of the Extended Fund Facility, the economy continues to recover, with inflation sharply lower and external buffers notably stronger, he added.

Risks to the outlook remain elevated, however, particularly from global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities, he added.

He said that against this backdrop, the authorities need to maintain sound macroeconomic policies and accelerate reforms to safeguard the macroeconomic gains and underpin stronger and sustainable, private sector-led medium-term growth.

“Timely implementation of power tariff adjustments has helped reduce the stock and flow of circular debt”, he added.

Meanwhile, cost-side reforms are showing early signs of success but need to be accelerated to safeguard the energy sector’s viability and improve Pakistan’s competitiveness”, he added.

He said that the State Bank of Pakistan’s (SBP) tight monetary policy stance has been pivotal in reducing inflation to historic lows. Monetary policy should remain appropriately tight and data-dependent to ensure inflation is anchored within the SBP’s target range.

He said that a more flexible exchange rate will facilitate the adjustment to external and domestic shocks, aiding the rebuilding of reserves.

He said that prompt action to address undercapitalized financial institutions and vigilance over the financial sector are necessary for financial stability.

Deputy Managing Director said that accelerating structural reforms will unlock Pakistan’s competitiveness, creating conditions to attract high-impact private investment.

Reducing Pakistan’s vulnerability to extreme weather events will enhance macroeconomic stability and fiscal sustainability, he said adding that the reforms under the Resilience and Sustainability Facility aim to build resilience to natural disasters by strengthening public investment processes, supporting efficient use of scarce water resources, strengthening coordination of natural disaster response and financing, improving the information on climate-related risks, and supporting Pakistan in meeting its international commitments.