The International Monetary Fund (IMF) on Tuesday approved the disbursement of a $1.2 billion package for Pakistan after the global money lender cited satisfaction with Pakistan's economic trajectory, after completing a second review of its reform agenda under the Extended Fund Facility (EFF) and the first review of its Resilience and Sustainability Facility (RSF).

The approval follows a staff-level agreement reached in October between Pakistan and the IMF on the country's ongoing loan programmes, with the $1.2bn tranche being part of an overall $3.3bn package.

Releasing a statement, the IMF wrote: "Today, the executive board of the IMF completed the second review of Pakistan's economic reform programme supported by the EFF and the first review supported by the RSF.

"This decision allows for an immediate disbursement of around $1 billion (SDR 760 million) under the EFF and around $200 million (SDR 154 million) under the RSF, bringing total disbursements to about $3.3 billion (SDR 2.434 billion)."

The IMF claimed that Islamabad had made "significant progress" in stabilising its economy despite an onslaught of problems, such as a hostile global environment and the devastating floods which hit the nation last year, further adding to its socio-economic woes.

Noting fiscal performance to be strong, with the country managing to achieve a primary surplus of 1.3% of GDP in FY25, the body noted the growth to be consistent with programme targets and within parameters, as per domestic media.

While inflation has risen in recent months due to the 2024 floods, causing disruptions in food supply chains the disturbances are expected to be a temporary hassle, adding that Pakistan's "gross reserves stood at $14.5 billion at end-FY25, up from $9.4 billion a year earlier, and are projected to continue to be rebuilt in FY26 and over the medium term."

The release of the $1.2bn tranche is expected to significantly bolster Pakistan's dwindling foreign exchange reserves, as the IMF citing satisfaction over Islamabad's implementation of suggested reform measures, called the ongoing loan programmes "strong" and assured the country of continued economic support.

The Islamic Republic and the global money lender had managed to reach a staff-level agreement on the second review of the 37-month EFF arrangement and the first review of the 28-month RSF arrangement by mid-October 2025.

An IMF team, led by Iva Petrova, held discussions in Karachi and Islamabad from September 24 to October 8 and in Washington, DC, to finalise the SLA.

According to the IMF, Pakistan's work on reform implementation has been strong, with its priorities now being geared towards the maintenance of fiscal discipline, supporting flood-affected households, keeping inflation within the central bank's target band, restoring energy-sector viability and advancing structural reforms.

The Fund also highlighted progress on Pakistan's RSF-supported climate agenda, noting that the recent floods underscore the urgency of comprehensive climate-resilience measures.

Ahead of the Board meeting, the lender released its Governance and Corruption Diagnostic (GCD) report. The report has warned that persistent corruption and weak institutions continue to undermine the country's economic development even as it stabilises under an EFF.

"Corruption is a persistent challenge in Pakistan, with significant adverse implications for economic development," the report noted, warning that leakages in public spending, weak revenue collection and mistrust in the justice system continue to impede progress.

The report further warned that the country's affluent political and economic "elites" have obstructed economic development by seizing reins of policy-making and in turn capturing public benefits for their own gain.

Crediting reform implementation for giving Islamabad a semblance of economic stability, Prime Minister Shehbaz Sharif said the IMF financial announcement highlights Pakistan's progress in implementing the measures necessary for economic stability and growth.

In a statement, he added that the IMF's acknowledgment of the effective execution of economic reforms and initiatives in Pakistan is a clear recognition of the hard work of Finance Minister Muhammad Aurangzeb and his team.

The PM also praised the country's newly-appointed Chief of Defence Forces and Pakistan Army Chief of Staff Field Marshal Syed Asim Munir for his valuable role in supporting the implementation of the body's reform agenda and facilitating Islamabad's economic development.

The premier said Pakistan had been pulled back from the brink of default through collective sacrifice, with political parties shelving partisan differences to navigate the crisis.

He further noted that economic reforms and digitisation initiatives had now become a "successful case study" internationally, making them a point of priority.

Voicing confidence over the establishment's vision of an economically developed and stable Pakistan in the near future, he argued that while some level stability has been achieved, he emphasised that continued efforts are necessary to propel the economy toward sustained growth.

The Pakistani premier reaffirmed his commitment to working tirelessly for the prosperity of the people and for liberating the country from foreign debt.