The International Monetary Fund said its executive board approved Pakistan's latest loan review on Monday, unlocking about $1.2 billion and keeping the country's IMF program on track.
The decision gives Pakistan fresh support as it rebuilds reserves and tries to keep inflation in check, while meeting IMF demands to raise revenue and advance the privatisation of state-owned companies.
The board approved the release of $1 billion under Pakistan's $7 billion Extended Fund Facility and $200 million under the Resilience and Sustainability Facility (RSF), taking total disbursements under both programs so far to about $3.3 billion.
Prime Minister Shehbaz Sharif's office, in a statement on Tuesday, said the IMF's sign-off reflected effective reform implementation by Pakistan. It said Pakistan had avoided default and now needed to turn hard-won stability into broader economic opportunity.
The approval follows a staff-level agreement reached in October, when the Fund said Pakistan was making progress in stabilising its economy, pointing to easing inflation, improving foreign exchange reserves and stronger investor sentiment.
The IMF program has been central to steadying Pakistan's $370 billion economy after last year's balance-of-payments crisis sent the rupee sharply lower and inflation to record highs.
The IMF said Pakistan's "strong program implementation, despite recent floods" had helped stabilise the economy and improve external conditions, adding that priorities now include strengthening public finances, restoring energy sector viability and accelerating productivity-boosting reforms.
"Pakistan must maintain prudent policies to entrench stability and drive stronger, private sector-led medium-term growth," Deputy Managing Director Nigel Clarke said in the statement.
Pakistan has pledged to keep monetary policy tight, strengthen public finances and push ahead with structural reforms, along with measures to improve resilience to climate shocks after devastating floods this year.
The Fund also flagged urgent climate reforms under the RSF, including better water-use pricing, stronger disaster-response coordination and greater disclosure of climate risks by banks and companies.
As part of its commitments under the IMF program, Pakistan is also pushing ahead with its first major privatisation in nearly two decades.
Prime Minister Sharif said last week the bidding for a majority stake in Pakistan International Airlines will be held on December 23, with four short-listed groups cleared to participate in the sale.
Countries under IMF lending programs must clear regular reviews, which trigger the release of loan tranches once approved by the executive board.