The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement that could unlock around $1.21 billion in fresh financing for the country. The agreement follows the 2026 Article IV consultation, the fourth review of Pakistan’s 37-month Extended Fund Facility (EFF) and the third review of the 28-month Resilience and Sustainability Facility (RSF).
The agreement is still subject to approval by the IMF Executive Board. If approved, Pakistan will receive about $1 billion under the EFF and another $210 million under the RSF. The latest disbursement would take total funds released under the two programmes to around $5.7 billion.
IMF Mission Chief Iva Petrova led discussions with Pakistani authorities in Karachi and Islamabad from September 23 to October 7. The talks focused on Pakistan’s economic performance, fiscal targets, structural reforms and climate-related measures.
Pakistan’s Economic Performance
The IMF said Pakistan has maintained macroeconomic stability despite external shocks, including the impact of the Middle East conflict, higher energy prices and supply disruptions.
Pakistan’s real GDP growth reached around 4 percent during the first three quarters of FY2026. However, the Fund estimates full-year growth at 3.6 percent after economic momentum weakened because of higher energy costs and supply disruptions.
Headline inflation moderated to around 10.3 percent in September after reaching a peak in May. The IMF said core inflation remained contained. Pakistan’s current account was also broadly balanced during FY2026, supported by strong remittance inflows.
Foreign exchange reserves improved to approximately $21.5 billion by the end of September. The IMF also noted that sovereign credit rating upgrades and renewed access to international financial markets pointed to improved policy credibility.
IMF Sets Fiscal and Energy Reform Priorities
Under the agreement, Pakistan is expected to maintain firm implementation of the FY2027 budget. The IMF has set a primary surplus target of 2 percent of GDP as part of efforts to keep public debt on a sustainable path.
The Fund also called for stronger revenue administration through risk-based audits, digital invoicing and greater use of third-party data. The reforms are aimed at improving tax collection and creating a simpler and fairer tax system.
Energy sector reforms remain another major priority. The IMF has stressed timely tariff adjustments, measures to prevent further circular debt accumulation and improved cost recovery across gas networks. It also supports greater private sector participation in power distribution to improve efficiency.
The agreement also includes measures to strengthen social protection. Health and education spending is expected to rise to 2.8 percent of GDP in FY2027, while targeted cash assistance will be expanded. Broad and costly fuel support schemes are expected to be replaced with more targeted and time-bound assistance.
Risks Remain for Pakistan’s Economy
Despite the progress, the IMF has warned that significant risks remain. These include geopolitical tensions, volatile energy prices, tighter global financial conditions and disruptions to international trade.
The RSF review also focuses on climate-related reforms, including climate risk assessments in public investment, irrigation water pricing reforms, energy efficiency standards and transport decarbonisation.
The latest staff-level agreement represents another important step for Pakistan’s economic programme. However, the proposed $1.21 billion financing will only be released after formal approval by the IMF Executive Board.
Also read: Pakistan, IMF Finalise Talks for $1.2 Billion Disbursement
