Pakistan is considering approaching International Monetary Fund (IMF) bailout package from $7.5 to $8 billion by incorporating climate finance into the Extended Fund Facility (EFF).
The approach aims to leverage the Special Drawing Rights (SDRs) available to Islamabad, potentially increasing the financial assistance under the EFF from the current $6 billion to between $7.5 and $8 billion.
During discussions for the Standby Arrangement (SBA) program in June 2023, Pakistan proposed expanding the financial scope of the program, a suggestion not pursued by the IMF at the time, citing the SBA’s short-term nature. However, the possibility was left open for future consideration.
Pakistani authorities are now exploring avenues similar to those adopted by Bangladesh to enhance the upcoming program’s scale. Specifically, climate finance is being scrutinized as a means to supplement the EFF program.
Read: IMF Review Mission to Visit Pakistan Post-Government Formation
The IMF’s Resilience and Sustainability Facility (RSF) emerges as a pivotal instrument, offering long-term, affordable financing for countries committed to reforms to mitigate the balance of payments linked to climate change and pandemic preparedness.
The RSF is designed to bolster economic resilience and sustainability by supporting policy reforms that address risks associated with climate change and enhancing the policy space and financial buffers against such structural challenges.
To be eligible for RSF access, countries must exhibit high-quality policy reforms tackling the structural challenges of climate change or pandemic readiness. Additionally, these countries must be engaged in an IMF-supported program that meets the upper credit tranche quality policies (UCT program) criteria.
The initiative aligns with Pakistan’s recent endorsement of the Public Investment Management Assessment (PIMA) framework, including the Climate-PIMA module under IMF guidelines. The framework aims to elevate public investment management standards to spur economic growth, enhance service delivery, and ensure public infrastructure’s sustainability and resilience to climate change.
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