Another blow to India as IMF approves $2.3b package for Pakistan

In a significant boost for Pakistan’s economic recovery efforts, the Executive Board of the International Monetary Fund (IMF) on Friday approved a total of $2.3 billion in funding.

The package includes a $1 billion tranche under the ongoing Extended Fund Facility (EFF) and a new $1.3 billion programme under the Resilience and Sustainability Facility (RSF).

The approval marks a crucial milestone for Pakistan, coming after months of fiscal reforms and negotiations.

The funding was greenlit despite reported opposition from India during the Executive Board meeting. India, which holds 2.7% of the IMF’s voting rights, had unsuccessfully attempted to block the approval.

Pakistan’s economic team, led by Finance Minister Muhammad Aurangzeb and Finance Secretary Imdad Ullah Bosal, worked to address earlier setbacks and fulfill outstanding programme conditions.

Additionally, Deputy Prime Minister Ishaq Dar played a key role in coordinating with coalition partners to meet requirements, including the introduction of agricultural income tax laws in Sindh and Balochistan.

Following the approval, the IMF will immediately disburse the $1 billion EFF tranche. The $1.3 billion under the RSF will be released over the next 28 months. With this latest release, Pakistan’s total disbursements under the EFF now amount to $2.1 billion.

The IMF agreement includes several commitments from Pakistan, such as imposing a carbon levy starting July and increasing water usage charges from next year. Islamabad has also agreed to initiate a study on gradually phasing out Special Economic Zones (SEZs) by 2035.

Earlier, a staff-level agreement had been reached between Pakistan and the IMF on the first review of the 37-month EFF and the new 28-month RSF. The RSF aims to support climate resilience and sustainability initiatives.

Pakistan has also committed to continuing fiscal consolidation to reduce public debt, while maintaining limits on current expenditures to avoid additional budgetary grants. The IMF emphasized the importance of balancing fiscal responsibility with adequate space for social and development spending.