IMF's approval of $1.2b loan disbursement for Pakistan to support economy
The Executive Board of the International Monetary Fund
(IMF) will convene today in Washington to review the disbursement of a $1.2
billion loan to Pakistan, according to state media reports.
In October, Pakistan and the IMF reached a Staff-Level Agreement (SLA) for the second review of the country’s $7 billion Extended Fund Facility (EFF) and the first review of the $1.4 billion Resilience and Sustainability Facility (RSF). These agreements came after an IMF mission, led by Iva Petrova, conducted discussions with Pakistani authorities in Karachi, Islamabad, and Washington D.C. from September 24 to October 8, 2025.
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State broadcaster Pakistan TV confirmed that the IMF's Executive Board will meet today to review and approve the disbursement of the $1.2 billion loan.
Pakistan has been struggling with a prolonged
macroeconomic crisis that has drained its foreign exchange reserves and led to
a balance of payments crisis. However, the country has seen some financial
improvements since 2022, including recording a surplus in its current account
and significantly reducing inflation.
Economists consider IMF bailout packages
essential for Pakistan, which has faced a cash crunch and relied on financial
support from bilateral partners like Saudi Arabia, China, and the UAE, as well
as multilateral lenders including the IMF, World Bank, Asian Development Bank,
and Islamic Development Bank.
Khaqan Najeeb, Pakistan’s former finance adviser, told Arab News last month that the $1.2 billion disbursement would help stabilize Pakistan’s short-term external position and unlock further inflows from official sources.
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“Continued engagement with the IMF strengthens macroeconomic stability, as seen in recent improvements in inflation, the current account, and reserve buffers,” Najeeb explained.
Pakistan’s financial crisis reached a critical
point in mid-2023 when foreign exchange reserves dipped to dangerously low
levels, covering less than three weeks of imports. Inflation soared to a record
38% in May, while the country struggled to secure external financing due to
delays in its IMF program. Fuel shortages, import restrictions, and a rapidly
depreciating rupee exacerbated the crisis, while rating agencies downgraded
Pakistan's debt and warned of an increased risk of default.
The situation was only alleviated after Pakistan secured a last-minute Stand-By Arrangement with the IMF in June 2023, unlocking emergency financial support and averting an immediate default.