IMF Approves $1.2 Billion Loan Tranche for Pakistan as Government Accepts 12 New Conditions

ISLAMABAD — The International Monetary Fund's executive board on Friday approved $1.2 billion in loan tranches for Pakistan after the government accepted a dozen new conditions and pledged adherence to pre-war programme targets to keep its economic stabilisation efforts on track. With this fresh approval, Pakistan has so far received a total of $4.5 billion from the IMF against two separate debt packages totalling $8.4 billion.

The funds will be disbursed early next week, taking the central bank's reserves to over $17 billion, according to government officials. Pakistan still has access to another $1 billion under the Extended Fund Facility and $200 million under the Resilience and Sustainability Facility.

Performance and Conditions

The IMF approval came after Pakistan demonstrated better performance against fiscal and monetary targets. The IMF mission reviewed Pakistan's economic performance for the July-December 2025 period, covering the third review of the $7 billion bailout package:

• Quantitative Targets Met — Pakistan met all end-December 2025 quantitative performance criteria, overperforming against the floor on net international reserves
• Primary Surplus — The government comfortably met the general government's primary balance target of Rs3.4 trillion
• Structural Benchmarks — Four structural benchmarks met in governance, social support, gas sector sustainability, and special technology zones
• FBR Shortfall — The Federal Board of Revenue remained the weakest link, missing targets on net tax revenues and income tax from retailers
• Climate Commitment — Under the $1.2 billion climate facility, Pakistan adopted a green taxonomy and climate risk management guidelines

New Conditions Accepted

Pakistan accepted approximately a dozen new conditions as part of the latest IMF agreement, including significant policy commitments for the coming fiscal year:

• Budget Approval — Parliament must approve the fiscal year 2026-27 budget in line with the IMF programme targets, similar to the current year's condition
• Tax Zone Reforms — Enact amendments to phase out fiscal incentives in Special Economic Zones and Special Technology Zones by June 2027
• Export Processing Zones — Prohibit EPZs from selling goods in the domestic market, with implementation by September this year
• Interest Rate Commitment — State Bank has already raised rates to 11.5% with commitment to further increases if inflation exceeds agreed limits
• Energy Pricing — Regular adjustment of electricity and gas prices while maintaining progressive tariff structures
• Primary Surplus Target — Deliver Rs2.84 trillion primary budget surplus next fiscal year, equal to 2% of GDP

Fiscal Discipline Commitment

Finance Minister Muhammad Aurangzeb assured the IMF that Pakistan remains committed to sound and prudent macroeconomic policies along with structural and institutional reforms. The government pledged it would not abandon the fiscal path agreed before the Middle East war and would deliver the primary budget surplus target through accelerated enforcement measures.

Government officials stated that the fresh assurances have been given to provide the foundation to withstand shocks, including the impact of regional tensions. Pakistan also committed that the new budget would be prepared in consultation with the IMF to ensure it remains fiscally tight without chasing higher economic growth at the expense of stability.

Total Conditions and Programme Scope

The total number of conditions the IMF has imposed over the past less than two years has now reached 75, encompassing all spheres of economic decision-making, governance, and private sector development. These conditions cover fiscal policy, monetary policy, energy sector reforms, tax administration, governance improvements, and social protection measures.

The $1 billion loan will be used for balance of payment support while the $200 million from the Resilience and Sustainability Facility is provided as budget support, according to government officials.