Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) to release $1.2 billion in a bailout package approved by the global agency last year.
The IMF approved a $7 billion bailout package in July 2024 to prevent Pakistan from defaulting on loans amid a weakening economy.
Pakistani media reported the deal on Wednesday, which followed several days of talks in Islamabad. The IMF confirmed the development in an overnight statement.
The IMF said Pakistan’s economic program is helping to consolidate macroeconomic stability and restore market confidence.
Last week, an IMF mission led by Iva Petrova concluded negotiations with Pakistani authorities on the second review of the EFF agreed in 2024 and the first review of the RSF climate loan agreed this year, but left Pakistan without signing a staff-level agreement.
How much money will Pakistan get?
Under the agreement, the Washington-based IMF will provide $1 billion to Pakistan under its Enhanced Facility (EFF).
Islamabad will receive an additional $200 million from the IMF under its Resilience and Sustainability Facility (RSF).
Both grants are subject to approval by the IMF Board.
What did the IMF say?
In a statement issued early Wednesday, Iva Petrova said the staff-level agreement to release IMF funds to Pakistan remains subject to IMF Executive Board approval.
“Supported by the EFF, Pakistan’s economic agenda is consolidating macroeconomic stability and restoring market confidence,” she said.
“The recovery remains on track, the FY25 current account recorded a surplus – the first in 14 years, the fiscal primary balance exceeded the program target, inflation remained under control, external buffers were strengthening and financial conditions are improving as sovereign bond spreads narrowed significantly,” she said.
However, she added that the recent floods have hit the country’s prospects, especially the agriculture sector, and reduced the forecast FY26 gross domestic product (GDP) to around 3.25-3.5 percent.
The bailout package for Pakistan was sharply opposed by India given its then-conflict with Islamabad, with New Delhi claiming the funds would be used to build terrorist infrastructure. Explaining the reasons for the IMF’s approval in May, he said the aid was granted after its board found that Pakistan had met all the conditions and targets for it.
IMF Terms for Pakistan
Earlier this year, the IMF imposed 11 conditions on Pakistan to approve the package.
Accordingly, Pakistan must pass a new federal budget for the financial year 2025-2026 that is in line with the IMF’s targets by June 2025.
The international body has also set another condition where the four units will be implemented through agricultural income tax laws.
Among other measures, the Government of Pakistan is also directed to publish a governance action plan based on recommendations from the IMF’s Governance Diagnostic Assessment to identify reform measures.
