WASHINGTON, D.C.: The International Monetary Fund announced that it has reached a staff-level agreement with Pakistan on its loan program, which would enable the country to access $1.2 billion upon approval from the Fund’s Board.The IMF will provide Pakistan $1 billion under its Extended Fund Facility and $200 million under its Resilience and Sustainability Facility, bringing total disbursements under the two arrangements to about $3.3 billion.
“The staff-level agreement is subject to approval by the IMF Executive Board. Upon approval, Pakistan will have access to about US$1.0 billion (SDR 760 million) under the EFF and about US$200 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about US$3.3 billion,” IMF said in a statement.
IMF mission chief Iva Petrova said Pakistan’s reform program under the EFF “is entrenching macroeconomic stability and rebuilding market confidence.” The country’s FY25 current account has recorded its first surplus in 14 years, inflation remains contained, and fiscal targets have been exceeded. However, recent floods affecting nearly seven million people have dampened the outlook for FY26 growth, projected at 3.3–3.5 percent.
According to Reuters news agency, Countries under IMF lending programs need to pass regular reviews, which, once signed off by the fund’s executive board, trigger loan tranche payments.
“Supported by the EFF, Pakistan’s economic program is entrenching macroeconomic stability and rebuilding market confidence,” the fund said in a statement.
The IMF said the South Asian nation’s recovery remains on track, with inflation remaining contained, external buffers strengthening, and financial conditions improving as sovereign spreads narrowed significantly.
Pakistan has also pledged to maintain an appropriately tight and data-dependent monetary policy and strengthen climate resilience in the wake of recent devastating floods.
Policy Priorities and Structural Reforms
The IMF highlighted Pakistan’s commitment to fiscal consolidation, targeting a FY26 primary surplus of 1.6 percent of GDP through enhanced revenue mobilization and expenditure control. The government pledged to strengthen the Benazir Income Support Programme and expand health and education spending.
Structural reforms aim to improve public financial management, tax policy design, and the energy sector’s performance. Plans include privatizing inefficient state-owned entities, reducing government involvement in commodity markets, and advancing the national tariff policy to stimulate trade and productivity.
Climate Resilience and Sustainability Agenda
Under the RSF, Pakistan’s climate reform program focuses on mitigating risks from natural disasters and advancing green policies. Efforts include decarbonizing transport, improving water system resilience, and strengthening disaster risk financing frameworks. The IMF emphasized that the 2025 floods underscore the urgency of building long-term climate resilience and governance reforms aligned with Pakistan’s national commitments.
IMF officials expressed sympathy for flood victims and thanked Pakistani authorities for their cooperation. Finance Minister Muhammad Aurangzeb, speaking from Washington, hailed the agreement as a “significant step toward stabilizing the economy and restoring investor confidence.”
“However, the recent floods- which have affected nearly 7 million people, caused over 1,000 deaths, and severely damaged housing, public infrastructure, and agricultural land- have weighed on the outlook, particularly of the agriculture sector, bringing down the projected FY26 GDP to about 3¼ -3½ percent,” said the ststement and added that the floods underscore Pakistan’s high vulnerability to natural disasters and substantial climate-related risks, and the continuing need to build climate resilience.
“The IMF team wants to express its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector, and development partners for many fruitful discussions and their hospitality throughout this mission,” it added.
Pakistan’s finance minister, Muhammad Aurangzeb, had said earlier on Tuesday that the country was set to sign a preliminary deal with the IMF, after an IMF team left Pakistan last week without sealing agreements.
In an interview, Aurangzeb said the government now plans to return to capital markets, starting with its first green bond denominated in Chinese yuan before the end of the year, followed by at least a $1 billion international bond.
The IMF’s support in September 2024 helped shore up Pakistan’s $370 billion economy following a severe economic crisis that sent its currency tumbling.
