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Aftab Maken
ISLAMABAD: The International Monetary Fund (IMF) Executive Board on Friday approved the latest review of Pakistan’s economic reform programme, paving the way for the release of $1.2 billion in financing under the ongoing bailout arrangement and signaling continued international support for the country’s stabilisation efforts.
The approved disbursement includes nearly $1 billion under the Extended Fund Facility (EFF) and around $200 million under the Resilience and Sustainability Facility (RSF). With the latest tranche, total disbursements under the current programme have reached approximately $4.5 billion.
Finance Minister Muhammad Aurangzeb also confirmed the development in Islamabad, saying the approval reflected Pakistan’s continued progress on difficult but necessary economic reforms. The decision was taken during a meeting of the IMF Executive Board in Washington, DC.
The IMF said Pakistan had successfully met major structural benchmarks under the programme, including tax reforms and energy pricing adjustments aimed at improving fiscal discipline and strengthening macroeconomic stability.
In its official statement, the Fund said Pakistan’s implementation of reforms under the EFF arrangement had remained strong despite growing uncertainty in the global economy.
“Pakistan’s strong programme implementation under the EFF arrangement has continued, which has supported macroeconomic stability and the rebuilding of fiscal and foreign exchange buffers,” the IMF said.
The Fund, however, warned that external risks had intensified due to geopolitical tensions linked to the Middle East conflict, stressing the need for Pakistan to maintain prudent economic policies and accelerate structural reforms.
“The shocks emanating from the Middle East war underline the continued importance of maintaining strong policies to continue building resilience and of moving ahead with structural reforms to achieve sustainable long-term growth,” the statement added.
According to the IMF, Pakistan’s economic indicators have shown improvement during the programme period. The Fund noted that GDP growth had accelerated, inflation had remained broadly contained despite recent pressures, and the current account stayed largely balanced during the first nine months of fiscal year 2025-26.
The IMF acknowledged that inflationary pressures had resurfaced mainly because of higher global commodity prices and their impact on domestic fuel and energy tariffs. It described the adjustments in administered prices as necessary steps to restore financial sustainability in the energy sector.
Pakistan’s foreign exchange reserves also improved during the review period, increasing to $16 billion by the end of December 2025 compared to $14.5 billion at the close of June 2025. The IMF said reserves were expected to strengthen further over the medium term with continued programme financing and disciplined policies.
Following the Executive Board meeting, IMF Deputy Managing Director and Acting Chair Nigel Clarke stressed that Pakistan must maintain tight macroeconomic policies while pushing ahead with reforms to withstand future shocks.
“Amid a more challenging and highly uncertain external environment since the onset of the war in the Middle East, Pakistan needs to maintain strong macroeconomic policies while accelerating reform efforts,” Clarke said.
He emphasised that gradual fiscal consolidation remained necessary to reduce economic vulnerabilities and strengthen investor confidence. The IMF urged authorities to continue expanding the tax base, improve compliance, and increase revenue collection from previously under-taxed sectors such as retail and agriculture.
The Fund also highlighted the importance of improving public spending efficiency and strengthening public financial management to create fiscal space for social protection programmes and investment in education and healthcare.
On monetary policy, the IMF commended the State Bank of Pakistan for maintaining a tight and proactive policy stance aimed at controlling inflation expectations. It advised authorities to remain vigilant against second-round inflationary effects on wages and prices.
The IMF further reiterated that exchange-rate flexibility should remain Pakistan’s primary buffer against external shocks as the country continues rebuilding reserves. It also supported gradual liberalisation of foreign exchange regulations and development of the currency market.
Energy sector reforms remained a key pillar of the IMF programme. The Fund stressed that improvements in the sector’s finances must continue through cost-reflective pricing of electricity, gas, and fuel while protecting low-income consumers through targeted subsidies.
The IMF also called for continued governance reforms, stronger anti-corruption institutions, and progress on state-owned enterprise restructuring and privatisation to improve economic efficiency and reduce fiscal burdens.
Pakistan is currently operating under a $7 billion, 37-month IMF programme designed to stabilise the economy through fiscal consolidation, structural reforms, and long-term growth measures. An IMF mission is expected to visit Islamabad on May 15 to discuss the upcoming federal budget and review progress on reform targets.
Analysts said the approval would provide short-term stability to financial markets, strengthen investor confidence, and support Pakistan’s external financing position at a time of continued global economic uncertainty.
