In a significant win for Pakistan, the International Monetary Fund (IMF) Executive Board has approved two crucial financial packages worth $2.3 billion, despite India’s efforts to block the deal during the meeting.
The IMF has authorized the release of a $1 billion second tranche from Pakistan’s Extended Fund Facility (EFF) and a new $1.3 billion under the Resilience and Sustainability Facility (RSF). This approval is a major diplomatic and economic victory for Pakistan, with the country’s economic team, led by Finance Minister Muhammad Aurangzeb and Secretary Finance Imdad Ullah Bosal, playing a pivotal role in securing the deal after initial challenges.
Pakistan’s efforts to meet the IMF’s stringent conditions were supported by Deputy Prime Minister Ishaq Dar, who utilized his connections within the Pakistan Peoples Party (PPP) to ensure the passage of key reforms. These included the introduction of Agriculture Income Tax laws in Sindh and Balochistan, which contributed to fulfilling several IMF requirements.
The approval includes immediate disbursement of the $1 billion tranche, with the $1.3 billion RSF to be distributed over the next 28 months. With this new arrangement, Pakistan’s total disbursements under the EFF will reach $2.1 billion.
Despite holding only a 2.7% voting share, India’s attempt to prevent the approval of the financial packages failed, marking another diplomatic defeat for the country. This setback follows India’s recent losses in a confrontation with the Pakistan Air Force, where five Indian fighter jets were shot down.
The IMF deal represents a crucial step in Pakistan’s efforts to stabilize its economy. To secure the deal, Pakistan has agreed to adjust several policies, including reducing tax targets and revising its strategy for foreign investment. As part of the RSF, Pakistan will also introduce a carbon levy starting in July and increase water usage charges next year, alongside a study to phase out Special Economic Zones (SEZs) by 2035.
This deal is expected to help Pakistan continue its fiscal consolidation, reduce public debt, and create fiscal space for essential social spending while avoiding excessive current expenditure. It marks an essential milestone in Pakistan’s ongoing economic reforms aimed at achieving financial stability and long-term sustainable growth.