ISLAMABAD: The International Monetary Fund’s (IMF) executive board will meet on May 9 to approve the immediate disbursement of about $1 billion to Pakistan under the ongoing Extended Fund Facility and allow an additional arrangement for the $1.3bn Resilience and Sustainability Facility (RSF).
According to the IMF, the board meeting will consider Pakistan’s request for modifications to performance criteria in line with changing ground realities.
The two sides had reached a staff-level agreement on March 25 on the first biannual review of the 39-month $7bn loan programme, agreeing on a series of reforms including the introduction of a carbon levy, timely revisions to electricity tariffs, increased water pricing and liberalisation of the automobile sector.
The staff-level agreement also entailed a new 28-month RSF arrangement, providing total access to around $1.3bn (1bn special drawing rights, or SDRs). This takes the combined size of the IMF support to about $8.3bn. The additional RSF financing, unlike the bailout package’s biannual review and disbursement schedule, is subject to disbursement on completion of specific projects and policy actions to build climate resilience.
The approval of the IMF’s executive board will lead to immediate disbursement of $1bn, bringing total disbursements under the loan programme to about $2bn. On successful completion of seven half-yearly reviews, Pakistan is entitled to seven equal instalments of about $1bn (SDR 760 million) under the loan programme.
The board approval would be soon followed by another IMF mission visiting Pakistan to finalise the 2025-26 budget to be presented in the National Assembly in the first week of June.
The implementation of major reforms — including the carbon levy, water pricing and automobile protectionism — would begin gradually from July 1. The overall ongoing fiscal consolidation will continue in the coming budget through a reduction in energy subsidies and tight development spending.
The government has already increased the petroleum levy on the sale of petroleum products by almost 30 per cent from Rs60 per litre to about Rs78 since the signing of the staff-level agreement with the IMF in March.
The government has committed to introducing a carbon levy on all hydrocarbons, including petroleum products and coal, starting with Rs3-5 per litre or equivalent for use in specific climate-related expenses. This will gradually increase.
Average tariffs for the automobile sector would also be reduced from about 10.5pc to 6pc from now to the fiscal year 2030.
Both the IMF and the authorities agreed that the auto sector had enjoyed too much protection for too long, which should end. The cabinet approvals for these two measures would be shared with the IMF and then introduced through the Finance Bill 2025-26 for implementation with effect from July 1.
According to informed sources, water pricing would also be approved in consultations with the provinces and dealt with separately.
Published in Dawn, April 30th, 2025
