In a significant development for Pakistan’s economy, the International Monetary Fund (IMF) has greenlit two financial packages totaling $2.3 billion. The decision, finalized during a recent Executive Board meeting, includes a $1 billion second tranche of the Extended Fund Facility (EFF) and a new $1.3 billion Resilience and Sustainability Facility (RSF) to be disbursed over the next 28 months. This move underscores Pakistan’s ongoing efforts to stabilize its economy despite regional diplomatic frictions.
Pakistan’s economic team, led by Finance Minister Muhammad Aurangzeb and Secretary Finance Imdad Ullah Bosal, navigated complex negotiations to secure these funds. Their efforts ensured compliance with IMF conditions, including the introduction of Agriculture Income Tax legislation in Sindh and Balochistan, facilitated by Deputy Prime Minister Ishaq Dar’s coordination with coalition partners.
The $1 billion EFF tranche will be released immediately, bringing total disbursements under the program to $2.1 billion. The RSF, aimed at fostering long-term economic resilience, includes measures such as a carbon levy starting in July 2025 and increased water usage charges from 2026. Pakistan also committed to studying the phased elimination of Special Economic Zones (SEZs) by 2035 and opening its economy to foreign investment.
Despite reported objections from India, which holds a 2.7% voting share in the IMF, the board approved the packages. This decision follows a period of heightened tensions between the two neighbors, though the IMF’s focus remained on Pakistan’s fiscal performance and reform commitments. Adjustments to the 25th EFF included lowering tax targets and setting new deadlines for restructuring the Pakistan Sovereign Wealth Fund.
Pakistan’s fiscal strategy emphasizes debt reduction while prioritizing social and development spending. The government has pledged to maintain budgetary discipline, avoiding unapproved supplementary grants to support private sector investment.
The IMF’s approval reflects confidence in Pakistan’s reform trajectory, offering a lifeline to bolster its economy amid regional challenges. Over the next two years, the RSF will support initiatives to enhance sustainability, positioning Pakistan for stronger economic growth.
