ISLAMABAD – Pakistan is preparing to request flexibility on IMF loans ahead of the 2026 budget. The government seeks renegotiation of the remaining Extended Fund Facility (EFF) and Resilience Sustainability Facility (RSF).
Prime Minister Shehbaz Sharif has left for Davos to attend the World Economic Forum (WEF) 2026. He will meet the IMF Managing Director on January 21 to discuss Pakistan’s economic challenges.
According to official sources, Pakistan aims to renegotiate the $7 billion EFF and $1.4 billion RSF until September 2027. The government wants fiscal space to stabilize the economy and finalize the 2026-27 budget.
A high-powered committee led by Deputy Prime Minister Ishaq Dar has been tasked with planning Pakistan’s exit strategy from the IMF programmed by 2027-28. The goal is to accelerate economic growth and recovery.
Recent data shows a 43% decline in foreign direct investment. The current account deficit has turned into a $1.2 billion shortfall for July-December 2025, signaling economic stress. Investment-to-GDP ratio may reach historic lows by fiscal year-end.
However, the Finance Ministry expects GDP growth to approach 4%, up from the IMF’s earlier revised forecast of 3.25-3.5%. Exports are projected around $32 billion, while imports may range between $72-76 billion by June 2026. Remittances are estimated to reach $42 billion. For more insights on Pakistan’s economic performance, read IMF Report Highlights Gap Between Pakistan’s Targets and Reality.
Fiscal efforts include raising the petroleum levy to meet tax collection targets. The IMF review mission is expected in late February or early March 2026 for the third review under the $7 billion EFF programmed, which will finalize the budgetary framework.
Key government proposals include export-led growth, boosting investment, and reducing power tariffs for industries. Tax incentives and reforms under the industrial policy are pending IMF approval. The super tax rate for manufacturing may gradually reduce to 5% over four years and could be abolished in the fifth year if a primary surplus is achieved.
The government also plans to leverage lower inflation to reduce the policy rate, making credit more accessible. Banks may be given lending targets to improve private sector financing, particularly for SMEs.
Pakistan’s engagement with the IMF aims to secure leniency on IMF loans, create fiscal space, and stabilize the economy before the 2026-27 budget.
