Pakistan gets a quick $1.2 billion shot in the arm from the IMF, but old worries about fund misuse linger. As floods and debt pile up, this tranche could steady the ship—or fuel more debate on accountability.
IMF Handover: Lifeline or Loophole in Crisis?
Washington/Islamabad: In a move that’s become all too familiar for Pakistan’s battered economy, the International Monetary Fund (IMF) on Tuesday greenlit the latest IMF Pakistan Funding tranche worth $1.2 billion. This includes $1 billion from the main Extended Fund Facility and $200 million under a climate resilience program, bringing total disbursements since last year to around $3.3 billion. The approval comes after the IMF’s executive board wrapped up two key reviews, noting Pakistan’s “significant progress” in holding the line against global headwinds and this year’s brutal floods.
It’s the third installment under a 37-month $7 billion bailout package kicked off in 2024, with another $1.4 billion RSF program layered on top for climate vulnerabilities.
Officials in Islamabad breathed a sigh of relief, as the cash infusion bolsters foreign reserves—now at $14.5 billion, up from $9.4 billion a year ago—and helps tame inflation that’s spiked due to flood-damaged crops. But for neighbors like India, it’s a reminder of unresolved tensions from earlier rounds.
How This IMF Pakistan Funding Fits the Bigger Picture
Think of it like a marathon with checkpoints: Each tranche demands Pakistan hit reform milestones. The board’s nod this week followed an October staff agreement, highlighting better fiscal balances—a primary surplus of 1.3% of GDP—and steps to privatize money pits like Pakistan International Airlines, with bids set for December 23.
The climate slice targets disaster prep, smarter water management, and better reporting on green risks—vital after floods that wrecked homes and fields across the country.
Pakistan’s finance ministry folks I spoke with stressed this isn’t just a handout; it’s tied to rebuilding reserves, beefing up tax collection, and fixing leaky state firms, especially in energy where circular debt has long been a drag.
Still, the economy’s $370 billion size feels the strain, with growth ticking up modestly but inflation hovering as food prices bite harder post-monsoon chaos.
India’s Sharp Objections Echo from May’s Tranche
Flashback to May: When the IMF okayed a $1.4 billion slice—right after India’s Operation Sindoor against cross-border threats—New Delhi didn’t hold back. Skipping the vote, India’s rep at the board slammed the decision, warning that Pakistan’s “continued sponsorship of cross-border terrorism” sends a “dangerous message” to the world.
They argued such IMF Pakistan Funding risks tainting global lenders’ reps and could be diverted to “military and state-sponsored cross-border terrorist objectives,” mocking core international values.
This time around, India stayed quiet in the boardroom, but sources say the concerns haven’t faded. As one Delhi-based analyst put it off-record, “It’s the same script—bailouts keep coming, but safeguards against misuse? Still a gray area.” The IMF, for its part, focused on economic metrics, urging Islamabad to “stay the course” amid an “uncertain outlook.”
The Debt Mountain Pakistan’s Climbing
By July 2025, Pakistan’s total debt hit a staggering 80.6 trillion Pakistani rupees—about ₹25.66 lakh crore—with external borrowings alone at 26 trillion PKR (₹8.25 lakh crore), up 13% from last year. Domestic debt makes up the bulk at ₹17.41 lakh crore, squeezing budgets and forcing tough choices.
Decades of leaning on IMF loans and ally bailouts have kept the lights on, but critics wonder if reforms will ever break the cycle.
Inside the IMF’s Decision Engine
At the heart is the executive board: 24 directors repping countries or groups, including a standalone seat for India to voice national interests and flag policy pitfalls. They greenlight loans, tweak global economic strategies, and keep tabs on member states’ health. This week’s call? A thumbs-up for Pakistan’s grit, but with a nudge for deeper cuts in state spending and bolder revenue drives.
As Pakistan eyes more inflows from pals like the UAE, the real test is turning this IMF Pakistan Funding into lasting fixes—not just another patch on a fraying economy.
Keep tabs on our updates for the next board twists and how they ripple across South Asia.
Disclaimer: This article is for informational purposes only. The views expressed are based on reported facts and do not constitute financial or investment advice. Always consult certified experts for decisions impacting your finances.