Pakistan To Receive $1.2 Billion From IMF Amid Economic Recovery Efforts

The International Monetary Fund (IMF) has agreed to release $1.2 billion to Pakistan, following a staff-level agreement reached after several days of talks in Islamabad. The IMF confirmed the development in an overnight statement, noting that Pakistan's economic program is contributing to macroeconomic stability and restoring market confidence.

Background of the Bailout Package

In July 2024, the IMF approved a $7 billion bailout package for Pakistan under the Extended Fund Facility (EFF), designed to help the country avoid default amid a weakening economy. The latest agreement comes after the IMF mission, led by Iva Petrova, conducted discussions with Pakistani authorities regarding the second review of the 2024 EFF program and the first review of the 2025 Resilience and Sustainability Facility (RSF) climate loan. Although earlier talks did not immediately result in a staff-level agreement, the latest discussions paved the way for the release.

How Much Will Pakistan Receive?

Under the agreement:

• $1 billion will be disbursed through the Extended Fund Facility (EFF).
• $200 million will come from the Resilience and Sustainability Facility (RSF).
• Both disbursements remain subject to approval by the IMF Executive Board.

IMF's Statement

Iva Petrova stated that the staff-level agreement is aimed at supporting Pakistan's economic recovery, which is "on track" despite challenges. She highlighted:

• FY25 current account surplus - the first in 14 years.
• Fiscal primary balance exceeding program targets.
• Contained inflation and strengthened external buffers.
• Improved financial conditions, with sovereign spreads narrowing significantly.

However, she noted that recent floods have negatively affected Pakistan's outlook, particularly in the agriculture sector, revising the projected FY26 GDP growth to 3.25-3.5%.

India's Opposition and IMF Conditions

India had opposed the IMF bailout to Pakistan, citing concerns that funds could be diverted toward terror-related infrastructure. The IMF, however, approved the assistance after confirming that Pakistan had met all required conditions and targets.

Earlier this year, the IMF set 11 conditions for Pakistan to qualify for the package, including:

• Passing a federal budget for FY25-26 aligned with IMF targets.
• Implementing four units under Agricultural Income Tax laws.
• Publishing a governance action plan based on recommendations from the IMF Governance Diagnostic Assessment, aimed at identifying reform measures.

The release of this $1.2 billion package underscores Pakistan's ongoing efforts to stabilize its economy while meeting the IMF's structural and fiscal requirements.