ISLAMABAD: Pakistan and IMF reaches staff-level agreement on the latest reviews of the country’s economic programme, potentially unlocking around $1.21 billion in financing, subject to approval by the Fund’s Executive Board.
The agreement covers the fourth review of Pakistan’s 37-month Extended Fund Facility (EFF) and the third review of its 28-month Resilience and Sustainability Facility (RSF), the IMF said in an official statement.
Once approved, Pakistan is expected to receive about $1 billion under the EFF and $210 million through the RSF. The disbursements would bring total financing released under the two programmes to approximately $5.7 billion.
An IMF team led by Iva Petrova held discussions with Pakistani authorities in Islamabad and Karachi from September 23 to October 7 as part of the latest programme reviews and the 2026 Article IV consultation.
Pakistan and IMF Reaches Staff-Level Agreement as Economy Shows Stability
The IMF said Pakistan had maintained macroeconomic stability despite external pressures, including the impact of the conflict in the Middle East, higher energy prices and supply disruptions.
Real GDP growth reached 4 per cent during the first three quarters of fiscal year 2026, while full-year growth is estimated at 3.6pc. Headline inflation eased to around 10.3pc in September after reaching a peak in May, while core inflation remained relatively contained.
The country’s current account remained broadly balanced during FY26, supported by strong remittance inflows. Foreign exchange reserves also increased to around $21.5 billion by the end of September.
Despite the improvement, the IMF warned that significant risks remain, including geopolitical tensions, volatile energy prices, tighter global financial conditions and potential trade disruptions.
IMF Sets Out Key Reform Priorities
The Fund called for firm implementation of Pakistan’s FY27 budget and a primary surplus target equivalent to 2pc of GDP to help place public debt on a sustainable downward trajectory.
It also urged continued improvements in tax administration, including risk-based audits, digital invoicing and greater use of third-party data. The IMF stressed the need for a simpler and more equitable tax system.
The Fund further called for stronger public financial management, more efficient public investment and procurement, and measures to reduce debt rollover risks.
On social spending, the IMF noted that expenditure on health and education had increased from 2.2pc of GDP in FY24 to 2.5pc in FY26. The authorities plan to raise the share to 2.8pc of GDP in FY27.
Energy, Monetary and Structural Reforms
The IMF emphasised the importance of timely energy tariff adjustments and cost-reduction measures to prevent another buildup of circular debt. It also called for improvements in the efficiency of the electricity and gas sectors.
The State Bank of Pakistan, meanwhile, was urged to maintain an appropriately tight monetary policy stance to ensure inflation returns sustainably to its target range. The Fund also supported continued exchange-rate flexibility and further accumulation of foreign exchange reserves.
Under its broader structural reform agenda, the IMF highlighted the need to improve competition, reduce regulatory and trade barriers, advance privatisation and strengthen governance of state-owned enterprises.
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The Fund also stressed the importance of stronger anti-corruption institutions, deeper financial markets and greater investment in human and physical capital to boost productivity, employment, private investment and exports.
Under the RSF, Pakistan has also made progress in incorporating climate considerations into public investment planning and strengthening disaster-risk financing.
The staff-level agreement represents a significant step in the continuation of Pakistan’s IMF programme. However, the proposed financing remains subject to formal approval by the IMF Executive Board before the funds can be released
