IMF board approved US$1.2bn tranche for Pakistan

The IMF executive board has approved the second review for Pakistan under the Extended Funded Facility (EFF) and the first review of the Resilience and Sustainability Facility (RSF); both will release funds of US$1.2bn. This will bring the total disbursement by the IMF under both programs to Pakistan to US$3.3bn. Topline Pakistan Research reported this.

We believe that with this fund release, the State Bank of Pakistan (SBP)’s liquid FX reserves will cross US$15.5bn, which is also SBP’s target for Dec 2025. The IMF program continues to focus mainly on macroeconomic stability, strengthening public finances, raising productivity and competitiveness, and improving the energy sector’s viability, among others.

The IMF has acknowledged Pakistan’s policy efforts, noting progress towards stabilising the economy despite the challenging global environment and recent floods in the country.

Key Macroeconomic Indicators Projection:

GDP growth target revised down: The IMF has reduced Pakistan’s GDP growth target for FY26 from the earlier 3.6% to 3.2%. We believe a reduction in GDP growth is due to a temporary flood-related dip in economic activity. We maintain the Pakistan GDP growth target of 3.0-3.5% for FY26.

Current Account Deficit (CAD) Projection revised up: The IMF has revised up Pakistan’s CAD Projections from 0.4% of GDP to 0.6% of GDP for FY26. We attribute this to rising imports and slower export growth. We maintain a CAD target of 0.5-1.0% of GDP for FY26.

Reserves target revised slightly: IMF has raised the reserves target for Jun 2026 by US$155mn to US$17.8bn. We maintain the FX reserves target at US$17.4bn for Jun 2026.

Primary balance target revised up: Despite floods, the IMF has raised the FY26 primary balance target from 1.6% of GDP to 2.5% of GDP. We attribute this to SBP’s higher actual dividend, around 1.9% of GDP. Any dividend above 1% of GDP must be used for debt retirement.

Market Outlook:

Index expected to reach 203k by Dec 2026: We highlighted successful IMF reviews and the release of funds as triggers for an index re-rating in our 2026 annual strategy report, released on Nov 08, 2025. We reiterate our index target of 203k for Dec 2026.