Pakistan is preparing to formally request additional funding from the International Monetary Fund (IMF) to mitigate the economic consequences of the ongoing conflict in the Middle East. The government intends to increase the size of its current $7 billion Extended Fund Facility rather than initiate a new programme, with negotiations already in progress between the finance ministry and IMF officials.
To date, Islamabad has drawn approximately $4 billion from the programme and anticipates receiving another $1 billion tranche shortly. However, authorities now seek an extra $2 to $2.5 billion to manage escalating external pressures resulting from the conflict.
In a significant development, policymakers have highlighted growing economic risks linked to the war, including surging energy prices, disruptions in supply chains, and potential adverse effects on inflation, exports, and remittances. Finance Minister Muhammad Aurangzeb has directly engaged with IMF representatives, emphasizing the urgent need for assistance to absorb these “external shocks.”
Government insiders suggest there is a strong possibility that the IMF will agree to increase the loan amount, as member nations collectively pursue tens of billions of dollars in support to address the crisis.
Pakistan’s request follows a recent $3 billion financial aid package from Saudi Arabia, which played a crucial role in stabilizing the country’s foreign exchange reserves after a shortfall emerged. Despite this, officials remain focused on sustaining reserves at levels consistent with IMF benchmarks.
Expanding the existing programme is viewed as the most practical approach, although it may involve higher borrowing costs unless terms such as surcharge rates or the disbursement schedule are renegotiated. Meanwhile, the government continues to navigate these complex financial challenges amid the broader regional instability.
