Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) on the third review of its Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF), bringing it closer to receiving fresh financial support.
The agreement still needs approval from the IMF Executive Board. Once approved, Pakistan will be able to access about $1 billion under the EFF and around $210 million under the RSF, taking total disbursements under both programs to nearly $4.5 billion.
The IMF said Pakistan’s reform program is largely on track, with progress in fiscal discipline, inflation control, energy sector reforms, and broader structural changes aimed at stabilizing the economy and improving investor confidence.
The Fund noted that economic activity has improved after recovery in the last fiscal year, while inflation and the current account have remained under control. However, it also warned that global uncertainties, especially tensions in the Middle East, could pose risks through higher energy prices and tighter financial conditions.
Pakistani authorities have committed to maintaining careful economic policies to protect recent gains while expanding social support programs for vulnerable groups affected by rising costs.
Under the program, the government aims to achieve a primary budget surplus of 1.6 percent of GDP in FY2026 and move toward 2 percent in FY2027. Efforts are also focused on widening the tax base, controlling spending, and improving coordination between federal and provincial governments.
Tax reforms led by the Federal Board of Revenue include stronger audits, expanded digital invoicing, better monitoring of production, and improved internal systems. A new Tax Policy Office is also working on a long-term strategy for stable and sustainable revenue growth.
The government has also pledged to strengthen social protection through expanded coverage and inflation-linked payments under the Benazir Income Support Program, along with increased spending on health and education.
On the monetary side, the State Bank of Pakistan is expected to maintain a cautious policy approach to keep inflation within target levels, while allowing exchange rate flexibility to absorb external shocks.
Energy sector reforms remain a key focus, with plans to control circular debt through timely tariff adjustments, reduced subsidies, better efficiency, privatization of inefficient power companies, and a gradual shift toward a competitive and renewable energy-based system.
The IMF also highlighted ongoing reforms to improve governance, reduce market distortions, advance privatization, and strengthen anti-corruption measures to support private sector growth.
Climate-related reforms under the RSF are also progressing, including steps to promote green transport, improve climate risk management, strengthen water systems, and develop disaster financing mechanisms.
The agreement followed discussions between an IMF team led by Iva Petrova and Pakistani officials in Karachi and Islamabad, along with virtual meetings.
Final approval by the IMF Executive Board will unlock the next tranche of funding and mark another step in Pakistan’s economic stabilization efforts.
