IMF Completes Pakistan's Second Climate Facility Review as Disaster Financing and Climate Budgeting Come Due

The International Monetary Fund has published its staff report on Pakistan's third review under the Extended Fund Facility and second review under the Resilience and Sustainability Facility, IMF Country Report No. 26/101, dated 23 April 2026 and released on 14 May. The RSF is the IMF's climate-focused lending window, which provides longer-term financing tied to reforms that build resilience to climate shocks. The report confirms that Pakistan completed two reform measures under the RSF: the State Bank of Pakistan issued guidelines on climate-related financial risk for banks, and the Securities and Exchange Commission of Pakistan issued guidelines on climate risk and opportunity disclosure for companies.

Pakistan's RSF arrangement was approved in May 2025, alongside the first review of its $7 billion Extended Fund Facility. At that time, the IMF said the RSF would provide access to about $1.4 billion over the life of the arrangement, disbursed as reforms are completed. Disasters on this scale hit public finances directly, through relief and reconstruction spending and through lower tax revenue. A disaster risk financing framework sets out in advance how the government will pay for disaster response, rather than relying on emergency budget reallocations after the event.

For Pakistan, which has very low insurance penetration, the protection gap is large. The requirement for revised public investment procedures with at least a 30% climate weighting means that climate resilience and mitigation considerations would count for a significant share of the criteria used to approve and prioritise public projects. The State Bank's guidelines on climate-related financial risk ask banks to identify, measure and manage their exposure to physical risks, such as floods damaging borrowers' assets, and transition risks, such as policy changes affecting carbon-intensive sectors.

Pakistan's energy policy is also central to the EFF itself, which includes commitments on electricity and gas tariffs, reducing the power sector's circular debt and improving the performance of distribution companies. Climate risk disclosure guidelines for banks and listed companies also affect energy investment.