WASHINGTON: The International Monetary Fund executive board on Friday approved $1.2 billion in fresh funding for Pakistan after the government accepted nearly a dozen new economic conditions and pledged to stay committed to strict fiscal and monetary reforms.
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With the latest approval, Pakistan has now received approximately $4.5 billion under two IMF support programmes totaling $8.4 billion.
According to government officials, the latest tranche includes $1 billion under the Extended Fund Facility and $200 million under the Resilience and Sustainability Facility. The amount is expected to be released early next week and could raise the State Bank of Pakistan foreign exchange reserves above $17 billion.
The IMF approval followed Pakistan’s assurance that it would continue implementing stabilization policies despite rising criticism over unemployment, inflation, poverty and income inequality linked to austerity measures.
The IMF also approved modifications to performance targets related to Pakistan’s foreign exchange reserves and introduced new benchmarks extending into 2027.
Officials said the government performed better than expected on several fiscal and monetary targets during the July–December 2025 review period under the $7 billion bailout programme.
Pakistan successfully met all major quantitative performance criteria, including targets related to the government’s primary budget surplus and foreign exchange reserves.
However, the Federal Board of Revenue remained a weak area after missing tax collection and retail income tax targets set by the IMF.
To offset revenue shortfalls, the government increased petroleum levy rates and assured the IMF that tax administration reforms would continue aggressively.
Finance Minister Muhammad Aurangzeb reaffirmed Pakistan’s commitment to prudent macroeconomic policies and structural reforms aimed at achieving sustainable and inclusive economic growth.
Government officials said Pakistan also assured the IMF that it would maintain previously agreed fiscal targets despite economic pressures linked to tensions and conflict in the Middle East.
Under the agreement, Pakistan has committed to achieving a Rs3.4 trillion primary budget surplus this fiscal year and a Rs2.84 trillion surplus next year, equal to 2 percent of GDP.
The government further agreed to prepare the upcoming federal budget in close consultation with the IMF to ensure tight fiscal discipline and avoid excessive spending aimed at boosting short-term economic growth.
Meanwhile, the central bank has already increased interest rates to 11.5 percent and indicated further hikes could follow if inflation exceeds agreed targets.
Pakistan also pledged to continue regular electricity and gas tariff adjustments while protecting vulnerable consumers and pursuing energy sector reforms.
Among the new IMF conditions, the government committed to securing parliamentary approval for the 2026-27 budget in line with IMF recommendations.
Pakistan further agreed to amend laws governing Special Economic Zones and special technology zones to gradually phase out tax incentives by 2035.
The IMF also required Pakistan to prohibit Export Processing Zones from selling goods in the domestic market starting later this year to curb alleged tax evasion practices.
Officials said the total number of IMF conditions imposed on Pakistan during the past two years has now reached around 75, covering taxation, governance, energy reforms and private sector regulations.
