ISLAMABAD: The International Monetary Fund (IMF) has approved $1.3 billion for Pakistan after clearing two loan tranches under the country’s ongoing reform programme.
The decision follows a staff-level agreement reached in October and marks a significant step in supporting Pakistan’s economic stabilisation efforts. The approval includes nearly $1 billion through the Extended Fund Facility (EFF) and an additional $200 million under the Resilience and Sustainability Facility (RSF).
Reform priorities
Ahead of the decision, an IMF team led by Iva Petrova held discussions in Karachi, Islamabad and Washington, DC, between 24 September and 8 October to finalise the agreement. The lender acknowledged robust programme implementation and underscored the need to sustain fiscal discipline while ensuring support for flood-affected households. It also highlighted the importance of keeping inflation within the State Bank of Pakistan’s target range, restoring the energy sector’s financial health and pushing forward with structural reforms.
The IMF noted progress under the RSF-backed climate agenda, reiterating that recent floods have reinforced the urgency of comprehensive policies to mitigate climate-related risks. The RSF component aims to assist Pakistan in building long-term resilience as climate impacts continue to intensify.
Governance concerns
Alongside the financing decision, the IMF released its Governance and Corruption Diagnostic report. It warned that entrenched corruption and weak institutions are impeding the country’s development, even as stabilisation efforts continue under the EFF. The report found that persistent governance failures undermine public spending, revenue collection and confidence in the justice system. It added that citizens often face continuous informal payments for basic services, while economic and political elites have historically captured public benefits at the expense of broader progress.
