The International Monetary Fund (IMF) has reached an agreement with Pakistan for a new $1.3 billion loan under its climate resilience program and approved the first review of the country’s ongoing bailout package.

Pending approval from the IMF’s executive board, the new arrangement will be disbursed over 28 months, while an additional $1 billion will be unlocked under Pakistan’s existing $7 billion bailout program. This will bring total disbursements under the bailout to $2 billion.

The IMF program, secured in mid-2024, has been instrumental in stabilizing Pakistan’s economy. The lender acknowledged the country’s progress in restoring macroeconomic stability despite global challenges.

“Over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence,” the IMF stated.

Pakistan’s economy, valued at $350 billion, has been under strain but has shown signs of recovery. Inflation, which peaked at around 40% in May 2023, has been steadily declining, reaching 1.5% in February—its lowest level in nearly a decade. The finance ministry expects inflation to remain steady in March, ranging between 1% and 1.5%.

Despite improvements in financial conditions, external balances, and sovereign spreads, the IMF warned of risks, including geopolitical shocks and global financial tightening, which could threaten Pakistan’s economic gains.

The agreement comes as Islamabad prepares for its annual budget, typically presented in June.