Pakistan Secures $1.2bn IMF Tranche Following Reform Progress

Post by : Raina Nasser

Following the approval from the International Monetary Fund's (IMF) Executive Board, Pakistan has secured $1.2 billion through the Extended Fund Facility (EFF) and the climate-focused Resilience and Sustainability Facility (RSF). This information was communicated by the State Bank of Pakistan (SBP) on Thursday, stating that the funds will be reflected in the SBP’s foreign exchange reserves for the week ending December 12, 2025.

The IMF sanctioned this financial package during its meeting on December 8, 2025, after carrying out the second review of Pakistan’s economic reform strategy under the EFF and the first under the RSF. The financial backing aims to fortify macroeconomic stability while simultaneously promoting growth and climate resilience in the nation.

Nigel Clarke, Deputy Managing Director and Acting Chair of the IMF, emphasized that Pakistan’s execution of reforms under the EFF has been pivotal in maintaining economic stability amid recent domestic and global challenges. He remarked that real GDP growth has picked up pace, inflation expectations remain stable, and fiscal and external imbalances are gradually improving. Clarke urged Pakistan to persist with prudent policies that will further reinforce economic stability and propel necessary reforms for sustainable, private sector-led growth.

He acknowledged Pakistan’s commitment to reaching the FY2026 primary balance target while attending to urgent relief needs in the aftermath of severe flooding. Clarke pointed out that simplifying tax policy and broadening the tax base will be crucial in realizing fiscal sustainability and creating fiscal space to support climate resilience, social protections, human capital development, and public investment. Regarding monetary policy, maintaining a tight stance has been critical in keeping inflation under control, with expectations set within SBP’s target range. Improving central bank communication and enhancing the interbank foreign exchange market will further reinforce effective monetary policy and encourage exchange rate flexibility.

Additionally, the IMF has urged Pakistan to implement robust financial regulations to ensure a sound, well-capitalized financial sector while promoting capital market development, enhancing financing options for both public and private sectors. Structural reforms are essential to unlock growth potential, attract impactful private investment, and enhance governance. The recent release of the Governance and Corruption Diagnostic report is seen as a constructive move towards accelerating governance reforms, with an emphasis on SOE governance and privatization to enhance the business environment and the quality of economic data.

Prime Minister Shehbaz Sharif welcomed the IMF’s financial announcement, stating it reflects Pakistan’s advancement in executing crucial measures aimed at securing economic stability and promoting growth. He expressed that the IMF's recognition of Pakistan’s adept handling of economic reforms underscores the commitment of Finance Minister Muhammad Aurangzeb and his team in steering the country’s economic agenda.

This $1.2 billion support from the IMF is anticipated to bolster Pakistan’s foreign reserves, enhance investor confidence, and supply essential resources for maintaining macroeconomic stability while endorsing reforms that facilitate sustainable economic growth in the medium term.