By Staff Reporter
ISLAMABAD: The International Monetary Fund’s Executive Board approved the latest review of Pakistan’s economic program on Friday, clearing the way for the disbursement of about $1.2 billion in fresh financing.
Finance Minister Muhammad Aurangzeb confirmed the decision in Islamabad, saying it reflects the country’s continued progress on difficult but necessary reforms. The board’s vote in Washington underscores the fund’s ongoing support for Islamabad’s multi-year effort to restore macroeconomic stability amid external and regional challenges.
The latest tranche comprises roughly $1 billion under the Extended Fund Facility and about $200 million under the Resilience and Sustainability Facility. That brings total disbursements under the two arrangements to roughly $4.5 billion. Pakistan is operating under a $7 billion, 37-month IMF program that began earlier 2024 and is designed to deliver fiscal discipline, structural changes and the foundations for longer-term growth. The approval follows a staff-level agreement reached on March 27 after the completion of the third review under the EFF and the second under the RSF.
Authorities met 14 of 17 quantitative performance criteria and indicative targets for the end of December 2025, according to local media. The IMF said the review was completed after Pakistan delivered on key structural benchmarks, including tax-policy measures and energy-price adjustments aimed at strengthening fiscal discipline and improving macroeconomic stability. Officials described the program as focused on rebuilding foreign-exchange reserves, containing inflationary pressures and maintaining a tighter fiscal stance.
Looking ahead, the reform path calls for sustaining a primary budget surplus of around 2% of gross domestic product, broadening the tax base and improving compliance in previously under-taxed sectors such as retail and agriculture. Authorities are also expected to pursue additional revenue measures to lift the tax-to-GDP ratio over the medium term. Energy-sector changes remain a central pillar. The program requires regular and predictable tariff adjustments for electricity and gas to reduce circular debt and restore the sector’s financial viability.
In a significant policy shift, the government has given written assurances that it will abandon the existing blanket subsidy for households consuming up to 200 units of power and introduce a targeted subsidy from January 2027, using data from the Benazir Income Support Programme. The change is intended to curb widespread misuse, including the practice of installing multiple meters to keep individual readings below the subsidy threshold.
The program also envisages continued restructuring and privatization of selected state-owned enterprises to ease fiscal burdens and raise efficiency. Speaking to journalists outside Parliament House on Thursday, Aurangzeb declined to comment on whether electricity prices would rise or fall in the coming months. He said Prime Minister Shehbaz Sharif and the energy minister are working intensively on power-sector reforms and that the Ministry of Energy would provide details later.
The fresh IMF funds are expected to support Pakistan’s external position, with inflows helping to strengthen foreign-exchange reserves in the coming weeks. The central bank will continue to maintain a tight, data-driven monetary policy to anchor inflation expectations and preserve stability. An IMF mission is scheduled to visit Islamabad on May 15 to discuss the framework for the next federal budget and review progress on structural reforms. Analysts said the approval provides near-term stability for financial markets while reinforcing the government’s commitment to the reform agenda, which remains centered on long-term fiscal and external sustainability.
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