Pakistan’s central bank announced a significant financial milestone, having received $1.2 billion from the International Monetary Fund following successful program reviews. The State Bank of Pakistan confirmed the disbursement under both the Extended Fund Facility and Resilience and Sustainability Facility programs on December 10, 2025. This crucial funding injection represents another step in Pakistan’s ongoing economic recovery efforts, demonstrating continued international confidence in the country’s reform agenda.
Pakistan finishes two IMF program reviews
The IMF Executive Board finished the second review for Pakistan under the Extended Fund Facility arrangement for $7 billion and the first review under the Resilience and Sustainability Facility arrangement for $1.4 billion in meetings held in Washington earlier this week. The total disbursement of SDR 914 million, or about $1.2 billion, will be reflected in the foreign exchange reserves of the State Bank of Pakistan for the week ending December 12, 2025. This marks a total disbursement of about $3.3 billion under both arrangements.
The IMF has praised Pakistan’s strong performance in implementing its program despite recent difficulties, as it has continued to sustain stability and facilitate better financing. The fiscal sector of Pakistan has shown outstanding performance, as it has achieved a primary surplus of 1.3 percent of GDP in fiscal year 2025, which matches perfectly with the targets set by international institutions.
Foreign exchange reserves are still on a good recovery path
Gross reserves have shown a substantial improvement and also risen from $ 9.4 billion to $14.5 billion by the end of the fiscal year 2025 and are expected to further rise in FY26. The marked improvement in the gross reserves is a clear indicator that the capacity of Pakistan to meet obligations to foreign lenders has increased significantly.
Economic stabilization activities register achievements despite difficulties
Pakistan was already hovering on the brink of sovereign default in 2023, but missed this by a whisker with the IMF bailout package that came as a last-minute rescue. Hard decisions have been taken by the country in order to meet the requirements of IMF loans, such as cutting subsidies on food and fuel products, which had contributed to inflation over a short period of time, before now joining the continuous economic stabilisation.
The disbursement comes at a particularly significant moment for Pakistan, which is struggling to offset the effects of destructive monsoon floods that have resulted in more than 1,000 deaths since the end of June and cost the country a minimum of $2.9 billion. These events make the significance of RSF funding focused on climate even more pertinent.
Important economic indicators:
- Primary surplus: 1.3% of GDP in FY25
- Foreign reserves: rose from $9.4bn to $14.5bn
- Total program disbursements: About $3.3 billion received
- Climate damage costs: $2.9bn in the recent monsoon season
IMF focuses on reform priorities that promote sustainable growth
Deputy Managing Director Nigel Clarke emphasized that it is essential for Pakistan to adopt a sound macroeconomic policy framework that will further embed macroeconomic stability while accelerating reforms required for sustainable growth. He pointed out the importance of advancing revenue reforms through tax policy simplification and broadening the tax base.
Clarke also emphasized the importance of energy sector reforms in ensuring the viability and competitiveness of Pakistan. Delays in power tariff increases have helped manage the circular debt, but future strategies should aim at lowering the cost of electricity production and eliminating inefficiencies in the energy sector.
The latest projections made by the IMF indicate that although the danger of immediate economic collapse has receded, Pakistan is still on a very thin line of stabilization with low growth, high debt, and little respite for households. Going forward, a continued commitment to reform pledges will be critical in ensuring that support from the international community is sustained.
