The State Bank of Pakistan (SBP) confirmed on Wednesday that it has received the second tranche of $1.023 billion from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF). This disbursement follows the IMF Executive Board’s approval of Pakistan’s progress under its $7 billion loan programme. The latest inflow will be recorded in Pakistan’s foreign exchange reserves for the week ending May 16, bolstering the country’s external buffers and supporting its reform agenda.
The approval of the second tranche comes after the IMF’s Executive Board meeting in Washington on May 9, which also gave the green light to a new 28-month Resilience and Sustainability Facility (RSF) for Pakistan, granting an additional $1.3 billion. The RSF aims to support Pakistan’s efforts to build climate resilience, a growing concern due to frequent extreme weather events in the region. The IMF acknowledged Pakistan’s progress in restoring macroeconomic stability, citing a sharp reduction in inflation and improved financial conditions. However, the Fund also highlighted persistent structural weaknesses such as a narrow tax base and underinvestment in key sectors like health and education.
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Meanwhile, Pakistan and the IMF are set to begin online discussions today (Wednesday) on the federal budget for the fiscal year 2025-26. These talks, which will run until May 16, will pave the way for policy-level consultations in Islamabad, expected to continue until May 23. The discussions are crucial for setting new fiscal targets as part of Pakistan’s commitments under the EFF. Finance Minister Muhammad Aurangzeb emphasized that the upcoming budget will focus on expanding the tax base, setting a credible fiscal path, and undertaking key structural reforms.
The IMF disbursement and the ongoing budget discussions are expected to provide some relief to Pakistan’s balance of payments and restore investor confidence, which had been shaken by concerns about external financing.
