Why has the IMF approved $1.2 billion for Pakistan now?

Islamabad: Pakistan and the International Monetary Fund have finalised a staff-level agreement (SLA) covering the third review of the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).

The agreement paves the way for the disbursement of approximately $1.2 billion, subject to approval by the IMF’s executive board.

Agreement reached after extended talks

Pakistan and the International Monetary Fund have successfully concluded a staff-level agreement (SLA) following prolonged negotiations that initially failed to yield results during in-person meetings held in Karachi and Islamabad between February 25 and March 2. The discussions later continued virtually, eventually leading to a breakthrough.

The agreement covers the third review of Pakistan’s Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF). This development is crucial as it enables the next tranche of financial assistance, subject to formal approval by the IMF Executive Board.

Breakdown of the $1.2 billion package

According to IMF mission chief Iva Petrova, the total disbursement will include approximately $1.0 billion under the EFF programme and about $210 million under the RSF.

The Extended Fund Facility is designed to support countries facing serious medium-term balance of payments problems, while the Resilience and Sustainability Facility focuses on long-term challenges such as climate resilience and sustainable development.

Pakistan’s reform commitments

The IMF noted that Pakistani authorities have reaffirmed their commitment to maintaining sound macroeconomic policies. This includes continuing fiscal discipline, strengthening financial stability, and implementing structural reforms aimed at boosting economic growth.

The programme also places emphasis on expanding social protection measures to shield vulnerable populations from the impact of inflation and volatile energy prices, which have been a key concern in recent years.

Background of IMF programmes

Pakistan joined the IMF’s $7 billion Extended Fund Facility in 2024 as part of efforts to stabilise its struggling economy, rebuild investor confidence, and address structural inefficiencies, particularly in the energy sector.

In addition, the country secured a $1.4 billion Resilience and Sustainability Facility to improve climate preparedness, enhance disaster management capabilities, promote water efficiency, and support green financing initiatives.

Why this deal matters

The agreement signals continued international financial support for Pakistan at a time when it faces economic pressures, including inflation, fiscal deficits, and external financing needs. Approval of the tranche will provide immediate liquidity support and reinforce confidence among global investors and financial institutions.

However, the disbursement remains contingent on IMF board approval, and Pakistan will need to maintain reform momentum to ensure continued access to funding under the programme.