IMF Approves $2.4 Billion Support Package for Pakistan amid Economic Reform and Climate Resilience Efforts

Moneylife Digital Team 10 May 2025

Economy & Nation

The International Monetary Fund (IMF) has completed the first review of Pakistan’s Extended Fund Facility (EFF), approving a US$1bn (billion) disbursement in recognition of the country’s steady progress on economic reforms. Alongside this, IMF also greenlit a US$1.4bn package under the Resilience and Sustainability Facility (RSF), aimed at bolstering Pakistan’s climate resilience and disaster preparedness.

This dual support package, totalling US$2.4bn, marks a significant vote of confidence in Pakistan’s reform agenda and its efforts to address climate vulnerabilities. The approval follows the IMF executive board’s assessment of Pakistan’s 37-month EFF programme which was originally initiated in September 2024 to promote macroeconomic stability and sustainable growth.

“Pakistan has made important progress in restoring macroeconomic stability despite a challenging environment,” said IMF deputy managing director and chair Nigel Clarke. He noted significant achievements, including a sharp drop in inflation and a strengthening of foreign reserves, indicators that suggest a recovering economy. Inflation fell to just 0.3% in April, while foreign reserves climbed to US$10.3bn, with projections reaching US$13.9bn by the end of June 2025.

IMF also praised the government’s commitment to fiscal responsibility, noting a primary surplus of 2.0% of GDP (gross domestic product) recorded in H1FY24-25. Reforms to expand the tax base, improve public services and increase energy sector efficiency have been central to the country's economic recovery.

However, not all international voices have welcomed the announcement. India has strongly opposed the IMF’s decision, accusing Pakistan of continuing to support cross-border terrorism. In an official statement, Indian authorities warned that financial support to Pakistan could damage the reputation of global institutions and compromise international norms.

Despite such objections, IMF has maintained its stance that the support is based strictly on Pakistan’s policy performance and its demonstrated reform progress. “IMF Board approved the first review of Pakistan's economic reform program under the EFF, enabling a disbursement of $1 billion, reflecting strong program implementation which has contributed to continuing economic recovery,” the IMF said in a post on social media platform X.

The RSF component, meanwhile, is intended to help Pakistan adapt to the growing impacts of climate change. The US$1.4bn will be used to strengthen infrastructure resilience, improve disaster response systems, manage water resources more efficiently and enhance climate-related financial transparency. These initiatives align closely with Pakistan’s international climate obligations and long-term development goals.

Still, IMF has cautioned that significant risks remain. Global economic volatility, domestic structural weaknesses and the need for ongoing reforms particularly in energy, state-owned enterprises, and taxation pose potential hurdles. The Fund underscored the importance of maintaining prudent monetary policies, a flexible exchange rate, and robust financial regulation to sustain the gains made thus far.

Pakistani officials have welcomed IMF’s endorsement and financial backing, viewing it as both a validation of the country’s economic path and a lifeline in navigating the complex dual challenge of economic recovery and climate resilience. The newly-approved funding is expected to ease short-term financial pressures, support growth and solidify Pakistan’s long-term reform agenda.

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