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- IMF Loan to Pakistan
- IMF Loan to Pakistan
- By Manohar Patil
IMF Loan to Pakistan: A Lifeline Amidst Economic Challenges
IMF Loan Pakistan
Pakistan’s economy has faced significant headwinds in recent years, marked by high inflation, low foreign exchange reserves, and a persistent balance of payments crisis. In a bid to stabilize the economy and foster sustainable growth, the country has repeatedly turned to the International Monetary Fund (IMF) for financial assistance. The recent approval of a $1 billion tranche under the Extended Fund Facility (EFF) and an additional $1.4 billion under the Resilience and Sustainability Facility (RSF) by the IMF Executive Board underscores the ongoing economic challenges and the crucial role of IMF support.
The Latest IMF Assistance Package
On May 9, 2025, the IMF Executive Board completed the first review of Pakistan’s economic reform program under the EFF arrangement. This decision paved the way for an immediate disbursement of approximately $1 billion (SDR 760 million), bringing the total disbursements under the current arrangement to about $2.1 billion (SDR 1.52 billion). Simultaneously, the board approved Pakistan’s request for an arrangement under the RSF, granting access to about $1.4 billion (SDR 1 billion). The RSF aims to support Pakistan’s efforts in building economic resilience to climate vulnerabilities and natural disasters.
Pakistan's Economic Predicament
Pakistan’s reliance on IMF bailouts is not a new phenomenon. The country has entered into 25 loan arrangements with the IMF over the past seven decades. This prolonged engagement highlights the structural weaknesses within the Pakistani economy, including a narrow tax base, an inefficient energy sector burdened by circular debt, and low productivity. The economic crisis in 2022-2024 saw soaring inflation and dwindling foreign reserves, exacerbating the country’s vulnerabilities. While recent data indicates a slowdown in inflation to a 30-year low of 0.7% in April 2025, significant challenges remain.
Geopolitical Context and India's Concerns
The recent IMF loan approval has occurred against a backdrop of heightened tensions between India and Pakistan. India abstained from voting on the loan, citing concerns about Pakistan’s track record with previous IMF programs and the potential misuse of funds for state-sponsored cross-border terrorism. India emphasized that Pakistan has been a frequent borrower from the IMF with a poor record of implementation and adherence to program conditions. These concerns underscore the complex geopolitical dimensions intertwined with Pakistan’s economic challenges and its relationship with international financial institutions.
The Path Forward
The IMF’s continued financial support provides a crucial lifeline for Pakistan, offering a window to implement necessary economic reforms. The successful execution of these reforms, focusing on fiscal discipline, structural adjustments, and building resilience to external shocks, will be vital for achieving long-term economic stability and reducing the country’s dependence on future bailouts. However, the persistent challenges and the geopolitical context suggest that Pakistan’s economic journey remains fraught with complexities.
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