IMF Endorses Pakistan’s Tight Monetary Policy, Approves $1.32 Billion Disbursement

Context The IMF completed the third review of Pakistan’s Extended Fund Facility and the second review of its Resilience and Sustainability Facility. Executives said the State Bank of Pakistan acted proactively to keep inflation expectations anchored amid higher global commodity prices and regional uncertainty. The Fund described exchange‑rate flexibility as the main shock absorber and urged continued deepening of the FX market.

Key Facts - Immediate disbursement: $1.32 billion (≈ SDR 914 million), split as $1.1 billion under the EFF and $220 million under the RSF, bringing total disbursements under both facilities to nearly $4.8 billion. - Gross foreign‑exchange reserves: $16 billion at end‑December 2025 versus $14.5 billion at end‑June 2025, a $1.5 billion increase. - Monetary stance: the State Bank of Pakistan maintained a tight policy, keeping the policy rate elevated to withdraw excess liquidity and anchor inflation expectations. - Market data: KSE100 closed at 171,115.82 points, down 1.03 % (‑1,778.46 points); KSE30 at 51,478.54, down 1.23 %; KMI30 at 245,731.79, down 1.22 %; Brent crude at $105.60 per barrel; Bitcoin futures at $80,800, up 0.52 %.

What It Means The IMF’s endorsement signals confidence that Pakistan’s macro‑economic framework is stabilizing, which could lower sovereign risk premia and support future external financing. The reserve buildup improves the buffer against external shocks, while the tight policy aims to keep inflation near target. The Fund noted that GDP growth accelerated during the first nine months of FY26, inflation remained contained, and the current account stayed broadly balanced. Fiscal performance remained strong, with the government expected to achieve a primary surplus of 1.6% of GDP in FY26. The IMF urged continued fiscal consolidation through stronger revenue mobilization, broader taxation, improved compliance, and better public financial management. It also stressed the need to keep energy prices aligned with costs, protect vulnerable consumers with targeted subsidies, and accelerate structural reforms such as privatization, SOE reforms, anti‑corruption measures, and business‑environment improvements. Climate‑resilience actions under the RSF are helping strengthen disaster response, water‑resource management, climate‑aware public investment, and financial disclosures.

Watch for the next SBP monetary‑policy meeting, the Q1 2026 inflation print, and the IMF’s scheduled review in late 2026, which will test whether reserve growth and policy tightness can be sustained amid global volatility.