Pakistan’s government and the International Monetary Fund (IMF) have reached a staff-level agreement on two key fronts: the first review of Pakistan’s existing $7 billion bailout program, and a new $1.3 billion loan specifically for climate resilience. 

Pending IMF board approval, this agreement will unlock approximately $1 billion from the existing bailout, bringing total disbursements under that program to $2 billion.

The new 28-month climate resilience loan, drawn from the IMF’s Resilience and Sustainability Trust (RST), will provide an additional $1.3 billion to help Pakistan adapt to climate change impacts.

The IMF cited Pakistan’s progress in restoring macroeconomic stability and rebuilding confidence over the past 18 months, noting a decline in inflation to its lowest level since 2015 and improvements in financial conditions and external balances. 

However, the IMF also acknowledged elevated downside risks, including geopolitical shocks, global financial tightening, and rising protectionism, which could threaten Pakistan’s economic stability.  The climate-related risks facing Pakistan were also highlighted as a significant challenge.

The agreement emphasizes Pakistan’s commitment to continued fiscal consolidation, fiscal structural reforms, tight monetary policy, energy sector reforms, and scaled-up climate change adaptation efforts. 

Finance Minister Muhammad Aurangzeb expressed optimism about the government’s policies and its commitment to further structural reforms. Earlier this month, Aurangzeb had said that there was no obstacle to successful review of IMF talks. The agreement comes ahead of Pakistan’s annual budget, providing much-needed financial support for the country.