The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the first review of Pakistan’s Extended Fund Facility (EFF) and a new arrangement under the Resilience and Sustainability Facility (RSF), according to an official IMF statement released today.
The staff-level agreement, which is subject to approval by the IMF’s Executive Board, includes access to around $1.3 billion under the RSF for climate resilience and sustainability efforts over the next 28 months.
Additionally, the agreement provides Pakistan with approximately $1.0 billion under the EFF, bringing total disbursements under the program to around $2.0 billion.
This agreement comes after extensive discussions between IMF staff, led by Nathan Porter, and Pakistani authorities, including meetings held in Karachi and Islamabad between February 24 and March 14, 2025.
According to the IMF, Pakistan has made significant progress in restoring macroeconomic stability despite a challenging global environment.
The key focus of the EFF-supported program is on fiscal consolidation, monetary policy to control inflation, and reforms to improve Pakistan’s energy sector.
The Pakistani government aims to reduce public debt, improve the energy sector’s viability, and enhance social protection, especially for health and education.
The RSF, which is designed to address long-standing vulnerabilities to climate shocks, will support Pakistan’s efforts to build resilience to natural disasters and improve climate adaptation. Specific objectives include enhancing public investment planning, improving water usage efficiency, and promoting green energy and mobility.
In line with the agreement, Pakistani authorities reiterated their commitment to pursuing structural reforms in key areas.
The government is focused on continuing fiscal reforms to reduce public debt and ensure transparency. Efforts to strengthen tax systems and improve public financial management are also central to the reform agenda.
The IMF has emphasised the importance of maintaining tight monetary policies to control inflation, which has dropped to its lowest level since 2015, and building foreign exchange reserves to stabilise the economy.
Furthermore, Pakistan plans to pursue energy sector reforms to reduce costs and improve distribution efficiencies.
Despite the progress made, the IMF warns that risks remain elevated, particularly concerning global economic conditions and climate-related challenges. Pakistan must stay the course with its reform efforts to ensure long-term growth and stability.
The IMF has also acknowledged Pakistan’s commitment to achieving climate adaptation targets and stressed the importance of continued support for disaster resilience initiatives.
“Over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment. While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger. While economic activity is expected to steadily improve, downside risks also remain elevated. Potential macroeconomic policy slippages—driven by pressures to ease policies—along with geopolitical shocks to commodity prices, tightening global financial conditions, or rising protectionism could undermine the hard-won macroeconomic stability. Additionally, climate-related risks continue to pose a significant challenge for Pakistan, creating a need to build resilience including through adaptation measures.
“In this regard, it is critical to stay the course and entrench the progress achieved over the past one and a half years, building resilience by further strengthening public finances, ensuring price stability, rebuilding external buffers and eliminating distortions in support of stronger, inclusive and sustained private sector-led growth.”
The IMF team also thanked Pakistani authorities, the private sector, and development partners for their hospitality and productive discussions during the mission to Islamabad and Karachi.
