IMF Approves $1.2 Billion Tranche for Pakistan Amid Economic Adjustments

Islamabad: The International Monetary Fund’s executive board has sanctioned a $1.2 billion disbursement for Pakistan following the second review under the Extended Fund Facility and the first review of the Resilience and Sustainability Facility. This funding increases the total IMF disbursements to Pakistan under both programs to $3.3 billion, aiming to bolster the nation’s economic stability amid challenging conditions.

The State Bank of Pakistan is expected to see its liquid foreign exchange reserves exceed $15.5 billion by December 2025, a target that aligns with the central bank’s objectives. The IMF’s ongoing program emphasizes macroeconomic stability, enhancing public finance, boosting productivity and competitiveness, and ensuring the viability of the energy sector.

The IMF has recognized Pakistan’s policy efforts, noting progress in stabilizing the economy despite global challenges and recent flooding. However, the IMF has revised down Pakistan’s GDP growth target for the fiscal year 2026 from 3.6% to 3.2%, attributing the adjustment to flood-related disruptions. The IMF has also adjusted the current account deficit projection for FY26 upward from 0.4% to 0.6% of GDP, citing increased imports and slow export growth.

The IMF has revised the foreign exchange reserves target for June 2026 upward by $155 million to $17.8 billion. Additionally, the primary balance target for FY26 has been increased from 1.6% to 2.5% of GDP, reflecting higher-than-expected dividends from the State Bank of Pakistan. Any dividend exceeding 1% of GDP is required to be allocated for debt retirement.

Market analysts anticipate that the successful IMF reviews and fund release could lead to a positive re-rating of the market index, projecting it to reach 203,000 by December 2026.