Pakistan Nears IMF Deal, Eyes $1.24 Billion Tranche and Major Economic Reforms

WASHINGTON (Mudassar Iqbal) – Pakistan is expected to sign a preliminary agreement with the International Monetary Fund (IMF) this week, paving the way for the release of a crucial $1.24 billion loan installment, Finance Minister Muhammad Aurangzeb confirmed during the IMF-World Bank annual meetings in Washington.

The agreement, known as the Staff Level Agreement (SLA), is part of the ongoing review under the IMF’s $7 billion Extended Fund Facility (EFF) and a newer $1.4 billion Resilience and Sustainability Facility (RSF) signed in 2024. The IMF mission recently concluded its visit to Pakistan without finalizing the review but continued constructive follow-up discussions with Islamabad.

“The mission was on the ground for a couple of weeks, we had very constructive dialogue… we’re hoping that we can get the SLA done during the course of this week,” Aurangzeb told Reuters.

The IMF’s funding remains critical to stabilizing Pakistan’s $370 billion economy, which has been battered by high inflation, a falling currency, and fiscal imbalances. The current programme, agreed upon in September 2024, provided much-needed support during one of Pakistan’s worst financial crises.

In addition to ongoing IMF talks, the finance minister revealed plans to float Pakistan’s first-ever green Panda bond denominated in Chinese yuan by the end of 2025, signaling a move to diversify funding sources. Pakistan also aims to return to global capital markets next year with a potential bond sale worth at least $1 billion.

“Euro, dollar, Sukuk, Islamic Sukuk – we’re keeping our options open,” Aurangzeb said, highlighting the government’s intent to tap multiple markets.

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Meanwhile, Pakistan’s long-delayed privatization drive is also set to accelerate, with the sale of three power distribution companies and the national carrier, Pakistan International Airlines (PIA), on the agenda. Aurangzeb noted increased investor interest, particularly after PIA regained access to European and UK routes.

“This is a very good proposition for investors,” he said, adding that five domestic groups, including Airblue, Lucky Cement, Arif Habib Group, and Fauji Fertilizer, have shown serious interest. Final bids for PIA are expected later this year, marking what could be Pakistan’s first major privatization in nearly two decades.

The government hopes that successful privatization and fiscal reforms, coupled with renewed IMF support, will restore investor confidence and help put the economy back on a sustainable growth path.