The International Monetary Fund (IMF) has approved a $1.2 billion disbursement for Pakistan following the second review of the country’s economic reform program under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF).

Under the decision, $1 billion will be released under the EFF and $200 million under the RSF, bringing total disbursements under both programs to $3.3 billion.

The IMF lauded Pakistan’s policy efforts, noting significant progress in stabilizing the economy and restoring confidence despite global challenges and recent severe floods.

Pakistan achieved a primary fiscal surplus of 1.3% of GDP in FY25, while gross reserves rose to $14.5 billion from $9.4 billion the previous year.

Inflation has increased due to flood-related impacts on food prices but is expected to be temporary.

The approval follows a staff-level agreement in October between Pakistan and the IMF. The lender described programme implementation as “strong” and reaffirmed its support for Pakistan’s ongoing economic reforms.

An IMF team, led by Iva Petrova, conducted discussions in Karachi, Islamabad, and Washington, DC, between September 24 and October 8 to finalize the arrangements.

Key priorities highlighted include sustaining fiscal discipline, supporting flood-affected households, maintaining inflation within the State Bank’s target range, restoring energy sector viability, and advancing structural reforms.

The IMF also praised progress on climate initiatives under the RSF, emphasizing that recent floods underscore the need for consistent reforms to mitigate climate risks.

Ahead of the Board meeting, the IMF released its Governance and Corruption Diagnostic (GCD) report, warning that persistent corruption and weak institutions continue to undermine Pakistan’s economic development, despite stabilization under the EFF.

The report highlighted that corruption negatively affects public spending, revenue collection, and trust in the legal system.

The report mentioned that Pakistanis are often compelled to make continuous payments to officials to obtain basic services, while funds lost to corruption could otherwise support higher production and development.

The report read that political and economic elites have obstructed economic development by seizing control of policies and capturing public benefits for their own gain.