ISLAMABAD (PEN) : Pakistan and the International Monetary Fund (IMF) have successfully finalized a staff-level agreement under the Extended Fund Facility (EFF), securing a $1 billion tranche subject to approval by the IMF Executive Board. Additionally, a new $1.3 billion arrangement under the Resilience and Sustainability Facility (RSF) has been agreed upon, bringing the total funding package to $2.3 billion.
Key Highlights of the Agreement
The IMF praised Pakistan’s efforts in stabilizing its economy despite the challenges posed by global economic conditions. The Fund recognized significant improvements in fiscal discipline, a decline in inflation, and the stabilization of external balances over the past 18 months.
However, the IMF cautioned that the country faces ongoing risks, including geopolitical tensions, fluctuating commodity prices, and climate-related challenges, which could threaten the economic recovery.
Areas of Focus for Continued Economic Reform
The staff-level agreement followed extensive discussions between Pakistani officials and an IMF delegation led by Nathan Porter. The IMF emphasized the need for continued economic stabilization and structural reforms, particularly in taxation, energy, and governance.
Among the key recommendations were broadening the tax base, with a focus on the implementation of agricultural income tax, and phasing out subsidies in the energy sector. The IMF also stressed the importance of maintaining tight monetary policy to control inflation, aiming for a target range of 5-7% over the medium term.
Pakistan has committed to maintaining fiscal discipline and ensuring that social welfare initiatives, such as the Benazir Income Support Programme (BISP), remain protected, while prioritizing spending in health, education, and climate resilience projects.
Energy and Climate Resilience Reforms
The IMF further highlighted the urgency of reforming the energy sector, particularly addressing circular debt through tariff adjustments for electricity and gas. It also stressed the need for efficiency improvements in power transmission and distribution. Additionally, the IMF called for governance reforms in Pakistan’s Sovereign Wealth Fund to boost investment potential.
The $1.3 billion under the RSF will support Pakistan’s climate resilience initiatives, including enhancing water resource management, expanding renewable energy, and promoting green mobility to reduce urban pollution.
Future Outlook and IMF Board Approval
The IMF Executive Board is expected to review the agreement in May 2025. Once approved, Pakistan will receive the $1 billion tranche under the EFF, while the RSF arrangement will disburse an additional $1.3 billion over 28 months.
The IMF programme remains crucial for Pakistan’s economic stability, with foreign exchange reserves standing at $11.15 billion as of March 14, 2025. The agreement is seen as a key step in securing external financing, bolstering investor confidence, and guiding the country toward long-term growth.
Despite the positive outlook, the IMF warned that premature policy easing, external shocks, and trade restrictions could undermine the country’s economic stability. The Fund urged Pakistan to remain committed to its reform agenda to ensure sustainable and inclusive growth.
