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By Muhammad Aslam
ISLAMABAD, Dec 9 (APP):The Executive Board of the International Monetary Fund (IMF) on Tuesday completed the second review of Pakistan’s economic reform programme under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF), enabling the country to draw a combined US$1.2 billion to support ongoing macroeconomic, structural and climate-resilience reforms.
The board’s approval allowed for an immediate disbursement of around US$1 billion (SDR 760 million) under the EFF and about US$200 million (SDR 154 million) under the RSF. With the latest tranche, total disbursements under both arrangements rise to approximately US$3.3 billion (SDR 2,434 million), an IMF news release said.
The 37-month EFF, approved in September 2024, aims to strengthen Pakistan’s macroeconomic stability, rebuild external buffers, broaden the tax base and reform state-owned enterprises (SOEs).
The Fund observed that Pakistan’s economic team had ensured “strong program implementation,” despite confronting a difficult global environment and the impact of recent devastating floods.
Under the programme, Pakistan posted a primary fiscal surplus of 1.3 percent of GDP in FY25, meeting agreed targets. The IMF said inflation had risen temporarily due to food-price pressures from the floods but remained manageable. Gross foreign exchange reserves improved to US$14.5 billion by end-FY25, up from US$9.4 billion a year earlier, and are projected to strengthen further in FY26.
The 28-month RSF, approved in May 2025, supports Pakistan’s climate-resilience agenda, including efforts to improve natural-disaster preparedness, strengthen public investment systems, increase water-use efficiency, enhance the disclosure of climate-related financial risks and support progress toward national mitigation commitments.
The IMF said the severe flooding experienced this year had further underscored the urgency of accelerating climate-related reforms, with RSF-linked initiatives now gaining traction across federal and provincial levels.
Following the Board’s deliberations, IMF Deputy Managing Director and Acting Chair Nigel Clarke lauded Pakistan’s continued reform efforts, stating that programme implementation under the EFF had “helped preserve macroeconomic stability in the face of several recent shocks.”
He said real GDP growth had accelerated, inflation expectations remained anchored, and both fiscal and external imbalances had moderated.
“In the face of an uncertain global environment, Pakistan needs to maintain prudent policies to further entrench macroeconomic stability, while accelerating reforms necessary to achieve stronger, private sector-led, and sustainable medium-term growth,” he stated.
Clarke said that the government’s resolve to meet the FY2026 primary balance target, while simultaneously allocating resources for urgent flood-relief operations, demonstrated its commitment to fiscal discipline.
He stressed that Pakistan must continue efforts to broaden the tax base and simplify tax policy to create space for climate resilience, social protection, human capital formation and public investment.
The IMF called for Pakistan to maintain a “tight monetary policy stance” to keep inflation anchored within the State Bank of Pakistan’s targeted range.
Clarke said stronger SBP communication would improve policy transmission, while exchange-rate flexibility and deeper interbank market functioning were essential to absorb external shocks.
He underlined the need for decisive regulatory enforcement to ensure bank soundness and encouraged further development of capital markets to broaden financing options.
Energy sector viability remained central to the reform agenda.
Clarke said timely tariff adjustments had helped contain circular debt but noted that Pakistan must now focus on lowering production and distribution costs and addressing persistent inefficiencies in the power and gas sectors. “Accelerating reforms in the energy sector is critical to safeguarding its viability and improving Pakistan’s competitiveness,” he remarked.
He welcomed Pakistan’s publication of the Governance and Corruption Diagnostic Report, calling it “a welcome step” that would support governance reforms and improve the business environment.
The IMF urged further progress on SOE governance reforms, privatization, regulatory improvements and strengthening of economic data systems.
Highlighting Pakistan’s increasing exposure to extreme weather events, Clarke said reducing climate vulnerability was vital for long-term macroeconomic and fiscal stability.
The RSF, he said, was helping Pakistan improve disaster-response coordination, rationalise water use, integrate climate considerations into public investment decisions and enhance the disclosure of climate-related risks across the financial system.
The IMF underscored that Pakistan’s policy priorities remained focused on maintaining macroeconomic stability, enhancing competition, raising productivity and competitiveness, bolstering the social safety net, reforming SOEs, improving public service delivery, and restoring the viability of the energy sector.