The International Monetary Fund ( IMF) on Friday approved the first review of Pakistan’s economic reform programme under the Extended Fund Facility (EFF), allowing an immediate disbursement of approximately $1 billion.
The decision brings total disbursements under the current 37-month arrangement to about $2.1 billion (SDR 1.52 billion).
Amid ongoing cross-border tensions, India, which had earlier signalled strong objections to further IMF lending to Pakistan citing its record on terrorism and fiscal mismanagement, abstained from voting during the IMF Executive Board meeting, according to official statement by the Indian government.
Also Read: On IMF’s lifeline, Pakistan struggles as India wields its economic power to block handouts
India’s abstention comes amid rising bilateral tensions, especially following the April 22 Pahalgam terror attack. Indian officials had indicated plans to challenge the bailout at the global level, but chose not to vote against the loan, possibly to avoid diplomatic fallout with other IMF member nations.
The IMF also cleared Pakistan’s request for a new arrangement under the Resilience and Sustainability Facility (RSF), providing access to an additional $1.4 billion. As per the IMF, these funds are intended to support Pakistan’s climate resilience efforts and broader macroeconomic stability.
“Pakistan has made important progress in restoring macroeconomic stability despite a challenging environment,” said IMF Deputy Managing Director and Chair, Nigel Clarke. “Since the approval of the Extended Fund Facility, the economy continues to recover, with inflation sharply lower and external buffers notably stronger.”
Also Read: India abstains from voting on Pakistan’s bailout package at IMF meeting
Inflation in Pakistan fell to 0.3 percent in April 2025 while gross foreign exchange reserves rose to $10.3 billion at the end of April, up from $9.4 billion in August 2024. The reserves are projected to reach $13.9 billion by the end of June 2025, amid total debt of $131 billion that Islamabad has.
According to IMF estimates, Pakistan posted a primary fiscal surplus of 2.0 percent of GDP in the first half of FY2025, keeping it on course to meet the full-year target of 2.1 percent. GDP growth is expected to edge up to 2.6 percent in FY2025, while the unemployment rate is projected to ease from 8.3 percent to 8.0 percent.
“Timely implementation of power tariff adjustments has helped reduce the stock and flow of circular debt,” Clarke said. “Meanwhile, cost-side reforms are showing early signs of success but need to be accelerated to safeguard the energy sector’s viability.”
The IMF stressed the importance of Pakistan maintaining “sound macroeconomic policies and accelerating reforms” to ensure economic stability. It called for broadening the tax base, enforcing fiscal discipline at both federal and provincial levels, and continuing reforms in state-owned enterprises and the energy sector.
The IMF warned, however, that risks remain elevated. “Risks to the outlook remain elevated, particularly from global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities,” Clarke said.
( Originally published on May 09, 2025 )
The decision brings total disbursements under the current 37-month arrangement to about $2.1 billion (SDR 1.52 billion).
Amid ongoing cross-border tensions, India, which had earlier signalled strong objections to further IMF lending to Pakistan citing its record on terrorism and fiscal mismanagement, abstained from voting during the IMF Executive Board meeting, according to official statement by the Indian government.
Also Read: On IMF’s lifeline, Pakistan struggles as India wields its economic power to block handouts
India’s abstention comes amid rising bilateral tensions, especially following the April 22 Pahalgam terror attack. Indian officials had indicated plans to challenge the bailout at the global level, but chose not to vote against the loan, possibly to avoid diplomatic fallout with other IMF member nations.
The IMF also cleared Pakistan’s request for a new arrangement under the Resilience and Sustainability Facility (RSF), providing access to an additional $1.4 billion. As per the IMF, these funds are intended to support Pakistan’s climate resilience efforts and broader macroeconomic stability.
“Pakistan has made important progress in restoring macroeconomic stability despite a challenging environment,” said IMF Deputy Managing Director and Chair, Nigel Clarke. “Since the approval of the Extended Fund Facility, the economy continues to recover, with inflation sharply lower and external buffers notably stronger.”
Also Read: India abstains from voting on Pakistan’s bailout package at IMF meeting
Inflation in Pakistan fell to 0.3 percent in April 2025 while gross foreign exchange reserves rose to $10.3 billion at the end of April, up from $9.4 billion in August 2024. The reserves are projected to reach $13.9 billion by the end of June 2025, amid total debt of $131 billion that Islamabad has.
According to IMF estimates, Pakistan posted a primary fiscal surplus of 2.0 percent of GDP in the first half of FY2025, keeping it on course to meet the full-year target of 2.1 percent. GDP growth is expected to edge up to 2.6 percent in FY2025, while the unemployment rate is projected to ease from 8.3 percent to 8.0 percent.
“Timely implementation of power tariff adjustments has helped reduce the stock and flow of circular debt,” Clarke said. “Meanwhile, cost-side reforms are showing early signs of success but need to be accelerated to safeguard the energy sector’s viability.”
The IMF stressed the importance of Pakistan maintaining “sound macroeconomic policies and accelerating reforms” to ensure economic stability. It called for broadening the tax base, enforcing fiscal discipline at both federal and provincial levels, and continuing reforms in state-owned enterprises and the energy sector.
The IMF warned, however, that risks remain elevated. “Risks to the outlook remain elevated, particularly from global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities,” Clarke said.
( Originally published on May 09, 2025 )
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