The International Monetary Fund (IMF) has approved a $1.2 billion loan to Pakistan, contingent on the country’s adherence to new economic conditions. This decision was made by the IMF’s executive board on May 8, 2026, following Pakistan’s commitment to maintain pre-war economic stabilization efforts.
To date, Pakistan has received $4.5 billion from the IMF as part of two separate debt packages totaling $8.4 billion. The latest tranche will be disbursed next week, increasing the State Bank of Pakistan’s reserves to over $17 billion, according to government officials.
The Pakistani government has agreed to maintain old fiscal and monetary targets despite criticism over resulting unemployment and income inequality. The IMF has also set new performance criteria for the State Bank of Pakistan through June 2027.
The $1 billion from this tranche will be used for balance of payment support, while $200 million is allocated for budget support. The IMF commended Pakistan’s performance against fiscal targets but noted shortfalls in tax revenue collection, prompting the government to pledge further reforms.
Pakistan’s Finance Minister, Muhammad Aurangzeb, confirmed the government’s dedication to macroeconomic policies and reforms, which include adopting a green taxonomy and managing climate-related financial risks. These efforts aim to sustain growth and withstand external shocks, such as the Middle East conflict.
Looking ahead, Pakistan has committed to a primary budget surplus target of Rs3.4 trillion for the current fiscal year and Rs2.84 trillion for the next, equating to 2% of GDP. The State Bank has already raised interest rates to 11.5% and plans further hikes if inflation exceeds agreed limits.
The government also plans to adjust energy tariffs and amend laws governing Special Economic Zones, with a focus on phasing out fiscal incentives by 2035. These measures are part of broader reforms to meet IMF conditions and stabilize the economy.
Published in SouthAsianDesk, May 11, 2026
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