IMF likely to disburse first tranche of $1.4 billion climate loan to Pakistan in six months
The International Monetary Fund (IMF) is expected to release the first tranche of its $1.4 billion climate resilience loan to Pakistan within the next six months, according to reports.
Last Friday, the IMF approved the climate loan under its Resilience and Sustainability Facility (RSF) and cleared the first review of Pakistan’s $7 billion Extended Fund Facility (EFF), unlocking $1.02 billion in immediate funds under the EFF.
According to the source, the RSF disbursement will coincide with the IMF’s second review of Pakistan’s EFF program. “If the [IMF] board approves the second review, then Pakistan may receive the first RSF tranche,” the source said, adding that this review is expected in about six months. “No climate financing will be disbursed until then,” they added.
Pakistan’s finance adviser Khurram Schehzad emphasized that the RSF loan is not a lump-sum payment. “It will be disbursed over the next 28 months, subject to meeting 13 key performance indicators (KPIs),” he said, without specifying the amount of the initial tranche.
The RSF aims to strengthen Pakistan’s economic resilience against climate change and natural disasters. Pakistan remains one of the most climate-vulnerable nations globally. In 2022, catastrophic floods—driven by abnormal rainfall and glacier melt—killed 1,700 people, displaced over 30 million, and caused $30 billion in damage.
These events prompted Pakistan to formally request the RSF loan in 2023.
The IMF approved the climate loan on May 9 and disbursed $1.02 billion from the EFF on May 13. The second EFF review is scheduled for September 15, according to Sana Tawfik, head of research at Arif Habib Ltd., citing the IMF’s 2024 Pakistan Country Report.
When asked if the review might be delayed, the source said it would proceed as scheduled.
The RSF funding is critical for Pakistan, whose foreign reserves recently rose to $10.3 billion—still below the IMF's recommended minimum for three months of import coverage.
In its May 5 monetary policy statement, the State Bank of Pakistan (SBP) noted that large debt repayments and delays in official inflows had strained financial inflows up to March. Pakistan, which narrowly avoided default in 2023 with an emergency IMF bailout, still faces $26 billion in debt repayments for the fiscal year ending in June.
While much of that debt has been settled, Pakistan continues to depend on IMF support to stabilize its balance of payments. The SBP projects that reserves will climb to $14 billion by June, bolstered by anticipated official inflows, and continue to grow in FY26 thanks to a manageable current account deficit and improved financial inflows.