ISLAMABAD – The State Bank received a $1.2 billion as Pakistan IMF tranche on Thursday. This disbursement follows the IMF Executive Board’s approval of the second review under the Extended Fund Facility and the first under the Resilience and Sustainability Facility. The funds arrived at 4:35 PM. They will strengthen foreign exchange reserves amid ongoing economic pressures. Pakistan’s government met key reform targets to secure the release.
The tranche marks a critical step in Pakistan’s IMF bailout program. It provides immediate liquidity to cover import bills and stabilise the rupee. Total disbursements under the two facilities now reach $3.3 billion. This inflow addresses balance-of-payments gaps in South Asia’s sixth-largest economy. It also underscores the IMF’s recognition of Pakistan’s resilience in the face of floods and global headwinds.
SBP Receives IMF $1.2 Billion: Reserves Set to Rise
The State Bank of Pakistan confirmed the receipt in an official statement. “The amount would be reflected in SBP’s foreign exchange reserves for the week ending on Dec 12,” the central bank said. Gross reserves stood at $14.5 billion as of November 28. This latest IMF tranche for Pakistan will push them higher. It eases pressure on external accounts strained by high debt servicing costs.
IMF Deputy Managing Director Nigel Clarke highlighted the progress. “The authorities’ strong program implementation, despite the recent devastating floods, has maintained stability and improved financing and external conditions,” he stated in the board’s press release. The EFF, a 37-month arrangement worth $7 billion approved in September 2024, targets macroeconomic stability. The RSF, a 28-month $1.4 billion program launched in May 2025, focuses on climate resilience.
Federal Finance Minister Muhammad Aurangzeb welcomed the development during a meeting of the Economic Coordination Committee. He credited coordinated efforts across federal and provincial levels for meeting IMF benchmarks. “This collective commitment and disciplined execution had been essential to strengthening Pakistan’s economic management and overall stability,” Aurangzeb said. The minister noted the IMF’s praise for Pakistan’s fiscal buffers, which enabled the country to handle flood shocks without resorting to emergency appeals.
Data from the IMF shows fiscal performance exceeded targets. Pakistan achieved a primary surplus of 1.3 per cent of GDP in FY25. Inflation rose due to flood-induced food price pressures but is expected to be temporary. Growth indicators ticked up, with GDP expansion projected at 2.5 per cent for FY26. The central bank has cut its policy rate by 1,100 basis points since June 2025, aiding disinflation to a historic low of 0.3 percent in April.
Pakistan Economic Reforms IMF 2025: Key Milestones Achieved
Pakistan’s economic reforms under the IMF 2025 agenda prioritise public finance strengthening and productivity gains. The board review emphasised advancing competition, bolstering social safety nets, and reforming state-owned enterprises. Energy sector viability remains a focus, with circular debt stabilised through tariff adjustments and better collections.
The IMF urged the continued implementation of tight monetary policy to anchor inflation within the SBP’s target range. Exchange-rate flexibility and deeper interbank markets were recommended to absorb shocks. Publication of the Governance and Corruption Diagnostic report marked a milestone. It maps vulnerabilities in government systems and suggests transparency enhancements.
Priorities include privatisation drives. Bidding for a majority stake in Pakistan International Airlines is scheduled to open on December 23. Four groups qualified for the process. This aligns with IMF demands to reduce fiscal burdens from loss-making entities. Revenue mobilisation efforts aim to broaden the tax base, with the digitalisation of tax administration underway.
In the social sphere, expansions to the Benazir Income Support Programme protect vulnerable households. Human capital investments, including education and health, aim to foster inclusive growth. The RSF portion of $200 million supports disaster preparedness. Funds will modernise water management and climate financial disclosures, addressing Pakistan’s vulnerability to extreme weather.
Despite gains, challenges persist. External debt repayments exceed $20 billion in FY26. Import cover remains below three months. The rupee depreciated by 5 percent year-on-year, although it has stabilized recently. Unemployment hovers at 6.5 percent, with youth joblessness being higher. These factors highlight the need for sustained reforms.
IMF Bailout Pakistan Reserves Boost: Broader Implications
The IMF bailout and Pakistan’s reserves boost extend beyond immediate liquidity. It signals restored investor confidence, potentially leading to lower borrowing costs. Bond yields fell 50 basis points post-approval. Remittances, at $30 billion annually, could rise with perceived stability.
In South Asia, this tranche influences regional dynamics. Pakistan’s improved reserves reduce contagion risks to its neighbours, such as India and Bangladesh, which face similar external pressures. It supports trade flows, with exports targeting $35 billion in FY26. Textiles and agriculture drive gains, supported by the EU’s GSP+ status.
The funds also enable debt rollovers. Saudi Arabia extended a $3 billion deposit for another year last week. China and the UAE provided similar rollovers totaling $4 billion. These bilateral supports complement the multilateral bailout.
Economists project that reserves will reach $16 billion by March 2026. This covers 3.5 months of imports, up from 2.5 months before the tranche. Inflation is forecast to average 7 percent in FY26, down from 12 percent last year. Growth acceleration to 3 per cent hinges on reform continuity.
Background: Evolution of Pakistan’s IMF Engagement
Pakistan has engaged with the IMF since 1958, securing 24 programmes. The current EFF follows a $3 billion Stand-By Arrangement in 2023 that averted default. Early disbursements rebuilt reserves from a low of $3 billion in 2023.
The 2024 floods, costing $30 billion, tested resilience. Yet, FY25 primary surplus hit targets despite relief spending of PKR 500 million. Structural benchmarks included power sector audits and SOE loss audits.
The RSF addresses chronic climate risks. Pakistan ranks eighth on the Global Climate Risk Index. Past deluges displaced millions and reduced cotton yields by 40 percent.
What’s Next for Pakistan IMF Tranche Implementation
Future disbursements hinge on quarterly reviews. The third EFF review is scheduled for June 2026, unlocking another $1 billion. RSF milestones focus on green bond issuance and flood insurance frameworks.
Policymakers must deepen reforms. Privatisation of three SOEs is slated for Q2 2026. The tax-to-GDP ratio aims for 15 percent by FY27. Enhanced data quality will track progress.
The Pakistan IMF tranche marks a pivotal phase in the country’s recovery. Sustained execution promises durable stability and growth for millions of people.
Published in SouthAsianDesk, December 11th, 2025
Follow SouthAsianDesk on X, Instagram, and Facebook for insights on business and current affairs from across South Asia.
