Pakistan ‘seeks’ additional $2b climate fund from IMF

Pakistan is seeking an additional $2 billion from the International Monetary Fund (IMF) to address the devastating impacts of climate change. Finance Minister Muhammad Aurangzeb will make the request during the annual IMF meetings scheduled for later this month.

Background of the Request

This development comes after Pakistan’s initial request for climate financing was not immediately approved by the IMF. Previously, on September 27, Pakistan requested a $1.5 billion loan from the IMF to combat climate change. Prime Minister Shehbaz Sharif discussed the need for urgent action with IMF Managing Director Kristalina Georgieva.

Pakistan’s Economic Reforms

To address fiscal sustainability, Pakistan has taken steps to mobilize revenue, including passing the FY24 budget, which advances a primary surplus of around 0.4 percent of GDP. The government has committed to ensuring a market-determined exchange rate and reducing inflation.

IMF Support

The IMF Executive Board approved Pakistan’s 37-month Extended Fund Facility (EFF) arrangement of about $7 billion on September 25. This arrangement aims to support Pakistan’s economic stability and growth, focusing on sustainable public finances, reduced inflation, and strengthened external buffers.

Key Objectives

The loan will support Pakistan’s Climate Resilience and Sustainability Facility, promoting economic stability and sustainable development. Key policy goals include:

• Sustainable Public Finances: Gradual fiscal consolidation through reforms to broaden the tax base
• Reduced Inflation: Monetary policy focused on disinflation
• Strengthened External Buffers: Flexible exchange rate and improved foreign exchange market transparency

The International Monetary Fund meetings, attended by the Finance Minister, Secretary of Finance, and State Bank officials, will conclude by October 26.

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