Washington, DC: Today, the Executive Board of the International Monetary Fund (IMF) completed the second review of Pakistan’s economic reform program supported by the EFF and the first review of Pakistan’s program supported by the RSF. This decision allows for an immediate disbursement of around US$1 billion (SDR 760 million) under the EFF and around US$200 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about $3.3 billion (SDR 2,434 billion).
Pakistan’s 37-month EFF was approved on September 25, 2024, and aims to build resilience and enable sustainable growth. Key priorities include (i) entrenching macroeconomic stability through consistent implementation of sound macro policies, including rebuilding international reserve buffers and broadening the tax base; (ii) advancing reforms to strengthen competition and raise productivity and competitiveness; and (iii) reforming SOEs and improving public service provision, developing human and physical capital, and restoring energy sector viability.
Pakistan’s policy efforts under the EFF have delivered significant progress in stabilizing the economy and rebuilding confidence amid a challenging global environment and recent severe floods. Fiscal performance has been strong, with a primary surplus of 1.3 percent of GDP achieved in FY25, in line with targets. Inflation has increased, reflecting the impact of the floods on food prices, but this is expected to be temporary. Gross reserves stood at $14.5 billion at end-FY25, up from $9.4 billion a year earlier, and are projected to continue to be rebuilt in FY26 and over the medium term.
The 28-month RSF was approved on May 9, 2025, and is supporting the authorities’ efforts to reduce vulnerabilities to natural disasters and to build economic and climate resilience. The authorities’ program: (i) prioritizes building resilience to natural disasters and strengthening public investment processes at all levels of government; (ii) making scarce water resource usage more efficient, including through better pricing; (iii) strengthening federal-provincial coordination of natural disaster response; (iv) improving the information architecture for, and disclosure of, climate-related risks by banks and corporates; and (v) supporting Pakistan’s efforts to meet its mitigation commitments and reduce related macro-critical risks.
Following the Executive Board discussion, Mr. Nigel Clarke, Deputy Managing Director and Acting Chair, made the following statement:
“Pakistan’s reform implementation under the EFF arrangement has helped preserve macroeconomic stability in the face of several recent shocks. Real GDP growth has accelerated, inflation expectations have remained anchored, and fiscal and external imbalances have continued to moderate. 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.
“The authorities’ commitment to the FY2026 primary balance target while accommodating urgent relief needs in response to the recent severe floods is a strong signal of their commitment to build fiscal policy credibility. In parallel, advancing reforms to raise revenues via tax policy simplification and base broadening is key to achieving fiscal sustainability and building the fiscal space necessary to boost climate resilience, social protection, human capital development, and public investment.
“An appropriately tight monetary policy stance has been pivotal in reducing inflation and should be maintained to ensure inflation remains anchored within the SBP’s target range. Further improvements in central bank communication will support effective monetary policy implementation. The SBP should continue efforts to deepen the interbank foreign exchange market, while allowing exchange rate flexibility to absorb shocks. Decisive financial regulation enforcement is necessary to maintain a sound and adequately capitalized financial sector. At the same time, promoting capital market development will help expand the public and private sectors’ financing options.
“Accelerating reforms in the energy sector is critical to safeguarding its viability and improving Pakistan’s competitiveness. Timely implementation of power tariff adjustments has helped reduce the stock and flow of circular debt. Subsequent efforts need to focus on sustainably reducing electricity production and distribution costs and addressing inefficiencies in the power and gas sectors.
“Efforts to advance structural reforms should continue to unlock growth potential and attract high-impact private investment. To this end, the publication of the Governance and Corruption Diagnostic report is a welcome step in accelerating governance reforms. Additional efforts should focus on SOE governance reforms and privatization, enhancing the business environment, and improving economic data and statistics.
“Reducing Pakistan’s vulnerability to extreme weather events, which has been underscored by the recent floods, will enhance macroeconomic and fiscal sustainability. The RSF arrangement is supporting efforts to strengthen natural disaster response and financing coordination, improve the use of scarce water resources, raise climate considerations in project selection and budgeting, and improve the information on climate-related risks in financing decisions
