The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the first review of Pakistan’s Extended Fund Facility (EFF) and a new arrangement under the Resilience and Sustainability Facility (RSF), according to an official IMF statement released today.
The staff-level agreement, which is subject to approval by the IMF’s Executive Board, includes access to around $1.3 billion under the RSF for climate resilience and sustainability efforts over the next 28 months.
Additionally, the agreement provides Pakistan with approximately $1.0 billion under the EFF, bringing total disbursements under the program to around $2.0 billion.
This agreement is the result of lengthy negotiations between Pakistani officials and IMF staff, led by Nathan Porter. The conversations took place in Karachi and Islamabad between February 24 and March 14, 2025.
Despite a difficult international context, Pakistan has made great strides toward reestablishing macroeconomic stability, according to the IMF.
The EFF-backed program’s main objectives include reforms to strengthen Pakistan’s energy industry, monetary policy to reduce inflation, and fiscal consolidation.
The goals of the Pakistani government are to lower the national debt, increase the profitability of the energy sector, and improve social protection, particularly in the areas of health and education.
The RSF will help Pakistan’s efforts to enhance climate adaptation and increase resilience to natural disasters. It is intended to address long-standing vulnerabilities to climate shocks. Enhancing public investment planning, increasing water efficiency, and advancing green energy and mobility are some specific goals.
Pakistani officials reaffirmed their commitment to implementing structural reforms in important sectors in accordance with the agreement.
To lower the national debt and maintain transparency, the government is committed to implementing more fiscal reforms. The reform strategy also places a strong emphasis on initiatives to enhance public financial management and fortify tax systems.
The IMF has emphasized the significance of establishing foreign exchange reserves to stabilize the economy and enforcing strict monetary policies to limit inflation, which has fallen to its lowest level since 2015.
In order to lower expenses and increase distribution efficiency, Pakistan also intends to explore changes in the energy sector.
The IMF cautions that risks are still high despite the advancements, especially in light of the state of the world economy and issues related to climate change. For stability and long-term progress, Pakistan must continue its reform initiatives.
The IMF has also emphasized the significance of sustained funding for disaster resilience efforts and recognized Pakistan’s dedication to meeting climate adaption targets.
“Despite a difficult international climate, Pakistan has made great strides in reestablishing confidence and macroeconomic stability over the last 18 months. Even while economic growth is still modest, financial conditions have improved, sovereign spreads have drastically shrunk, external balances are stronger, and inflation has dropped to its lowest level since 2015. Although a steady improvement in economic activity is anticipated, there is still a high chance of downside. In addition to geopolitical shocks to commodity prices, tighter global financial conditions, or rising protectionism, potential macroeconomic policy slippages—driven by demand to soften policies—could jeopardize the hard-won macroeconomic stability. Furthermore, Pakistan continues to face serious challenges from climate-related threats, necessitating the development of resilience, especially through adaption strategies.
In this sense, it is crucial to continue and solidify the gains made over the previous 18 months. Resilience can be increased by fortifying public finances, maintaining price stability, restoring external buffers, and removing distortions to promote more robust, equitable, and long-term private sector-led growth.
During the tour to Islamabad and Karachi, the IMF delegation also expressed gratitude to Pakistani officials, the business sector, and development partners for their hospitality and fruitful conversations.
NEWSON – IMF and Pakistan agree at the staff level on the new $1.3 billion RSF fund and the EFF review
1. What is the recent agreement between IMF and Pakistan about?
The IMF and Pakistan have reached a staff-level agreement under the Extended Fund Facility (EFF) and a new Resilience and Sustainability Facility (RSF). The deal includes $1.0 billion under EFF and $1.3 billion under RSF to support Pakistan’s economic reforms and climate resilience efforts.
2. What are the main goals of the agreement?
The agreement focuses on:
-
Strengthening Pakistan’s energy sector
-
Reducing inflation through tighter monetary policy
-
Enhancing climate resilience and disaster preparedness
-
Promoting fiscal consolidation to reduce national debt
-
Advancing social protection, especially in health and education
3. What reforms is Pakistan committing to under this program?
Pakistan is committing to:
-
Structural reforms in energy and tax systems
-
Strengthening public financial management
-
Boosting foreign reserves
-
Promoting green energy, water efficiency, and climate adaptation
-
Maintaining strict monetary policies to ensure stability
