IMF Disburses $1 Billion to Pakistan Under Extended Fund Facility (EFF)

What is EFF?

The Extended Fund Facility is an IMF lending program designed to assist countries facing long-term balance of payments issues stemming from structural economic weaknesses.

Key Features of EFF

• Administered by: International Monetary Fund (IMF), a Bretton Woods institution
• Nature of Loan: Repayable (not financial aid or grant)
• Tenure: Extended (usually 3+ years) with longer repayment timelines
• Objective: Supports medium-term structural reforms, such as:
  • Tax system overhaul
  • Inflation control
  • Fiscal deficit reduction
• Disbursement: In phases (tranches) based on IMF policy review of reform progress

Eligibility Criteria

• Persistent current account deficits or external payment imbalances
• Deep-seated issues in governance, public finances, tax administration, or investment climate
• Strong commitment to IMF-monitored economic reforms

EFF Loan Approval Process

1. Request: Borrowing country formally seeks IMF assistance
2. Staff-Level Agreement: Negotiation of proposed reform measures and targets
3. Executive Board Approval: IMF reviews and clears the reform agenda and macroeconomic framework
4. Tranche Disbursement: Funds released in phases, linked to reform milestones

Context in Pakistan’s Case (May 2025):

• The IMF Executive Board approved a $1 billion immediate disbursement
• The funds support Pakistan’s efforts to stabilize the economy amid fiscal imbalances and structural challenges
• Reforms target areas like tax collection, energy pricing, fiscal deficit control, and inflation containment