The International Monetary Fund (IMF) has made it clear that Pakistan’s access to $1.3 billion in climate financing is contingent upon the successful implementation of its $7 billion Extended Fund Facility (EFF) program. This move links crucial climate-related funding to Pakistan’s performance under the EFF, creating a significant incentive for the country to meet its economic obligations.
According to sources from Pakistan’s Finance Ministry, the climate financing allocation will be released in conjunction with the completion of each six-monthly economic review under the EFF program. This means that Pakistan will need to demonstrate its progress in meeting the economic targets set under the bailout package in order to unlock the funds. Each successful review will trigger the disbursement of the climate financing, ensuring that the funds are closely tied to Pakistan’s broader economic performance.
The $1.3 billion in climate financing is designed to help Pakistan tackle the mounting challenges posed by climate change, a country that has been disproportionately affected by extreme weather events such as floods, heatwaves, and droughts. However, in order to access this vital funding, Pakistan must first meet the stringent conditions laid out by the IMF under its EFF program, which spans a period of 37 months. The economic program includes a series of reforms aimed at stabilizing Pakistan’s economy, improving fiscal health, and boosting growth.
The EFF program is structured around periodic reviews, with each successful review unlocking both the next tranche of economic support and the corresponding allocation of climate financing. The climate financing program itself will last for 28 months, with each tranche of funds tied to specific milestones in Pakistan’s economic recovery and climate resilience efforts.
The IMF Executive Board is expected to approve the climate financing within the next four to six weeks, although delays are possible due to the IMF’s annual spring meetings, which may affect the timing of the approval. Once approved, the funds will be disbursed based on the progress Pakistan has made in meeting the conditions of the EFF program.
This conditional funding structure emphasizes the IMF’s focus on ensuring that Pakistan not only stabilizes its economy but also takes meaningful steps toward addressing climate change. The climate financing allocation is seen as a critical tool for Pakistan to implement much-needed environmental initiatives, from improving infrastructure to adopting sustainable agricultural practices, and enhancing disaster resilience.
Pakistan’s engagement with the IMF under the $7 billion EFF program has already led to significant reforms, including efforts to reduce the fiscal deficit, tackle inflation, and improve governance. However, the linking of climate financing to the completion of the program underscores the growing recognition of the importance of integrating climate resilience into economic recovery strategies.
For Pakistan, this approach offers an opportunity to secure much-needed funds for climate adaptation and mitigation, while also addressing the pressing economic challenges it faces. If Pakistan successfully completes the reviews and meets the required targets, it could unlock vital resources that will support its long-term efforts to combat climate change and enhance economic stability. The next few months will be crucial in determining whether Pakistan can meet these targets and access the full potential of the climate financing program.