IMF approves $1.2 billion loan for Pakistan. Funds under EFF and RSF will be used for economic stability and financial reforms. The amount will be released only after final approval from the board.
World Update: The International Monetary Fund (IMF) and Pakistan have reached an agreement on a $1.2 billion loan. This staff-level agreement took place on Wednesday, with both IMF officials and the Government of Pakistan consenting to the loan. However, the agreement still requires approval from the IMF's Executive Board for finalization. Pakistan will receive the amount only after this approval is granted.
Loan Framework
The IMF will provide Pakistan with $1 billion under its Extended Fund Facility – EFF and $200 million under its Resilience and Sustainability Facility – RSF. This funding will be disbursed to Pakistan only after final approval from the Board. The IMF has stated that the purpose of this fund is to strengthen Pakistan's economic stability and restore market confidence.
Improving Economic Stability
IMF officials stated that Pakistan's economy is now gradually on the path to recovery. A current account surplus was recorded for Fiscal Year 2025, marking the first time in 14 years. Program targets for the fiscal primary balance were met, inflation remained under control, and external buffers strengthened. Furthermore, sovereign spreads decreased significantly, indicating an improvement in Pakistan's financial position.
Floods Impacted Agricultural Sector
However, Pakistan was recently affected by floods, which particularly impacted agricultural productivity and future economic plans. The IMF has estimated that Pakistan's Gross Domestic Product (GDP) for Fiscal Year 2026 could fall to approximately 3.25-3.5 percent. This indicates that Pakistan may still face economic challenges.
Pakistan's Policy Commitment
IMF officials commended the progress made in Pakistan's policy priorities. Officials reiterated their commitment to EFF and RSF-supported programs and to implementing structural reforms. Pakistan has reaffirmed its commitment to maintaining robust and prudent macroeconomic policies. Thus, this agreement will help advance Pakistan's economic policies and reforms.
Pakistan's Economic Challenges
Pakistan's economy has been in crisis for a long time. The country carries a heavy burden of foreign debt, and foreign investment is low. Rising inflation and monetary pressures have further complicated the economic situation. At such a time, the $1.2 billion loan from the IMF will act as a relief for Pakistan. This fund will enable Pakistan to meet its financial needs and restore confidence in the international market.
