IMF approves $1.2 billion for Pakistan from bailout, citing progress on economic and climate reforms

ISLAMABAD (AP) – The International Monetary Fund on Tuesday approved the release of $1.2 billion to Pakistan, giving the cash-strapped country a fresh boost as it works to recover from one of its worst economic crises in years.

The IMF in a statement said its executive board completed two reviews of Pakistan’s economic programs, clearing about $1 billion under its main loan facility and another $200 million from a separate climate-focused program.

With the latest approval, Pakistan has received about $3.3 billion from the IMF since last year. Under the bailout, Islamabad will receive loan installments over 37 months if it meets the agreed conditions.

Pakistan, for decades, has relied on loans from the IMF and friendly nations to meet its financing needs.

Prime Minister Shehbaz Sharif welcomed the decision, calling it recognition of the government’s reform drive and the “effective implementation” of IMF-endorsed measures. He said the latest IMF decision shows Pakistan is taking the steps needed to stabilize and grow its economy after narrowly avoiding default last year.

In a statement, Sharif also praised Field Marshal Gen. Asim Munir, the country’s powerful army chief and chief of defense forces, for playing a key role in supporting the reform agenda.

He also praised Finance Minister Muhammad Aurangzeb and his team for their “tireless work” in pushing through difficult changes. Sharif said Pakistan’s reform and digitalization efforts have now become a global “case study,” but cautioned that shifting from stability to sustained growth will demand further effort.

In a statement, the IMF said Pakistan has made “significant progress” in stabilizing the economy despite a tough global environment and this year’s devastating floods. It noted a stronger fiscal position, higher foreign exchange reserves – now at $14.5 billion – and an uptick in growth. Inflation has risen in recent months because floods triggered by above-normal monsoon rains pushed up food prices, but the fund expects that to ease.

The bailout, approved in 2024, aims to rebuild Pakistan’s reserves, strengthen its tax system and reform loss-making state-owned companies, especially in the energy sector. The climate facility, approved earlier this year, supports efforts to improve disaster management, water use and climate-related financial reporting.

Nigel Clarke, the IMF’s deputy managing director, said Pakistan must stay disciplined as it faces an uncertain outlook. He praised the government’s commitment to meeting next year’s budget targets while responding to flood damage, and urged Islamabad to keep monetary policy tight, allow the exchange rate to move freely and push ahead with long-delayed energy reforms.