The International Monetary Fund (IMF) has announced a staff-level agreement (SLA) with Pakistan for the release of approximately $1.2 billion, following the successful completion of the third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).
According to the IMF, the agreement remains subject to approval by its Executive Board. Once approved, Pakistan will gain access to around $1.0 billion under the EFF and $210 million under the RSF, bringing total disbursements under both programmes to about $4.5 billion.
Economic Progress and Key Developments
The IMF noted that Pakistan’s programme implementation has remained broadly on track, with progress seen in:
- Strengthening public finances
- Keeping inflation within the target range of the State Bank of Pakistan
- Advancing energy sector reforms
- Implementing structural reforms to support economic stability
The Fund also acknowledged that economic activity has gained momentum following recovery in FY25, while inflation and the current account have remained relatively contained. External financial buffers have also improved.
However, the IMF warned that ongoing tensions in the Middle East could pose risks through volatile energy prices and tighter global financial conditions.
Fiscal Discipline and Reform Agenda
Pakistan has reaffirmed its commitment to maintaining a prudent fiscal policy aimed at reducing public debt and ensuring long-term sustainability.
Key fiscal targets include:
- Achieving a primary surplus of 1.6% of GDP in FY26
- Moving towards a 2% surplus in FY27
Efforts are underway to broaden the tax base and improve expenditure management, while also increasing spending on health, education, and social protection.
The Federal Board of Revenue (FBR) is implementing reforms to improve revenue collection, including:
- Strengthening tax audits
- Expanding digital invoicing systems
- Enhancing internal governance
A newly established Tax Policy Office is also working on a medium-term strategy to ensure tax stability and efficiency.
Social Protection and Public Welfare
To shield vulnerable populations from rising food and fuel prices, the government is strengthening the Benazir Income Support Programme (BISP) through:
- Inflation-adjusted cash transfers
- Expanded beneficiary coverage
- Improved payment systems
Additionally, both federal and provincial governments are increasing investments in health and education to support inclusive growth.
Monetary Policy and Exchange Rate
The IMF emphasized the importance of maintaining an appropriate monetary policy, with the State Bank prepared to raise interest rates if inflationary pressures intensify.
Exchange rate flexibility will continue to act as a key buffer against external shocks, particularly those arising from global uncertainties and regional conflicts.
Energy Sector Reforms
A major focus remains on improving the financial viability of Pakistan’s energy sector and preventing the buildup of circular debt.
The IMF stressed:
- Timely tariff adjustments to ensure cost recovery
- Avoidance of untargeted subsidies
- Improvements in transmission and distribution systems
- Privatisation of inefficient power generation units
The government is also working towards transitioning to a competitive electricity market and increasing reliance on renewable energy sources.
Structural Reforms and Privatization
Pakistan is continuing efforts to implement broad structural reforms aimed at:
- Strengthening governance
- Reducing regulatory barriers
- Boosting productivity
- Encouraging private sector growth
Reforms of state-owned enterprises (SOEs) and the privatisation agenda remain central to improving service delivery and reducing the government’s economic footprint.
Climate Resilience Initiatives
Under the RSF programme, Pakistan is advancing its climate reform agenda, focusing on:
- Promoting green transport and mobility
- Strengthening climate data systems
- Managing climate-related financial risks
Future reforms will target water system resilience, disaster risk financing, and aligning energy policies with environmental goals.
