IMF Approves $1.3 Billion Loan Tranche for Pakistan Despite Indian Objections

The International Monetary Fund approved a $1.3 billion loan tranche for Pakistan on May 8, 2026, following the third review of the country's Extended Fund Facility program. The disbursement comprises approximately $1.1 billion under the EFF and $220 million under the Resilience and Sustainability Facility, bringing total program disbursements to roughly $4.8 billion.

Ahead of the decision, Finance Minister Muhammad Aurangzeb briefed the National Assembly Standing Committee on Finance and Revenue in Islamabad, expressing confidence that the IMF board would approve the tranche. He cited rising foreign-exchange reserves, remittance inflows, and a current-account surplus as evidence of macroeconomic progress, while acknowledging inflationary pressures and petroleum import costs.

The IMF acknowledged Pakistan's strong reform implementation but warned that the country remains vulnerable to external risks, particularly instability from the ongoing Middle East conflict. The board urged continued fiscal discipline, tax and energy-sector reforms, and tighter monetary policy. The State Bank of Pakistan had raised its policy rate to 11.5 percent in April, its first hike in nearly three years.

India objected to the bailout at the IMF board meeting, citing concerns over the potential misuse of funds for state-sponsored terrorism and regional security issues. Pakistani officials welcomed the approval, with Deputy Prime Minister Ishaq Dar describing it as reflecting the IMF's trust in the government's policies and reforms.

The State Bank of Pakistan received the $1.3 billion disbursement on May 12, with the inflow expected to push foreign-exchange reserves to approximately $17 billion. The funds will be reflected in reserves for the week ending May 15.