IMF Rejects Pakistan’s Plea for $1.4 Billion Climate Loan Boost

ISLAMABAD – Pakistan’s appeal for enhanced climate financing has once again run aground as the International Monetary Fund (IMF) declined to scale up the $1.4 billion Resilience and Sustainability Facility (RSF) during the second review of its $7 billion Extended Fund Facility (EFF). The decision, confirmed by IMF Pakistan representative Mahir Binici, underscores the Fund’s determination to hold the line on fiscal prudence even as Pakistan struggles to pick up the pieces from last June’s devastating floods, which killed over 1,000 people, displaced 7 million, and wiped out 2.2 million acres of crops worth $2.9 billion.

The RSF, launched in May 2025, was designed to back reforms aimed at greening Pakistan’s economy—shifting transport systems toward cleaner mobility and shoring up water resilience. The October 14 agreement unlocked $1.2 billion—$1 billion from the EFF and $200 million from the RSF—bringing total disbursements to $3.3 billion. Yet the IMF refused to step in with additional aid, arguing that Pakistan must stay the course on fiscal consolidation. Despite notable progress—record-low inflation and reserves built up to $14.44 billion—the Fund projects modest FY26 GDP growth of 3.25–3.5%, signaling a cautious outlook.

For Pakistan, which contributes barely 1% to global emissions but bears the brunt of climate disasters, the IMF’s stance cuts deep. Officials argue that global lenders talk up climate justice but fail to follow through: of the $30 billion pledged in 2022, only $600 million has actually come through. Finance Minister Muhammad Aurangzeb plans to roll out $1 billion in green bonds by December, while Punjab has set aside Rs100 billion for “Green Recovery Zones.” But with poverty on the rise and exports tapering off, Pakistan finds itself boxed in—pushed to clean up its economy and rebuild its resilience while global institutions hold back the funds it desperately needs to carry on.