The International Monetary Fund (IMF) has urged Pakistan to limit petroleum subsidies to deserving people, phase out costly fuel support schemes and speed up energy sector reforms to reduce pressure on the economy.
The fund has also called for a cautious fiscal policy to control inflation. It said financial assistance during periods of rising oil prices should be temporary and targeted at vulnerable households rather than provided through broad fuel subsidies.
Pakistan’s Economic Growth Outlook
According to the IMF statement, Pakistan’s economy grew by 4 per cent between July 2025 and March 2026. However, growth is projected to slow to 3.6 per cent due to the economic impact of the Middle East crisis.
Inflation reached its highest level in May 2026, while remittances from overseas Pakistanis helped keep the current account deficit under control.
The IMF stressed that Pakistan needs to balance economic support for vulnerable people with measures to maintain fiscal stability and manage inflation.
Energy Sector Reforms Underlined
The fund called for improved recovery of outstanding payments in the energy sector, reduced gas losses and steps to lower production costs.
It also stressed the importance of timely energy price adjustments and cost-cutting reforms to reduce financial pressure on the sector.
These measures are aimed at improving the performance of the energy system and limiting the need for government support. The IMF has also urged Pakistan to continue broader reforms to strengthen the economy.
State Bank Urged to Control Inflation
The IMF said the State Bank of Pakistan should maintain a sufficiently tight monetary policy to keep inflation under control. It also called for measures to increase the country’s foreign exchange reserves.
The recommendations come as Pakistan continues to manage economic pressures linked to higher energy costs and uncertainty in the region.
$1.2 Billion Financing Agreement
Pakistan and the IMF reached a staff-level agreement on October 8, 2026, following the fourth review of the $7 billion Extended Fund Facility and the third review of the $1.4 billion Resilience and Sustainability Facility.
The agreement could pave the way for approximately $1.2 billion in additional financing, subject to approval by the IMF Executive Board.
The programme is also linked to structural reforms involving state-owned enterprises, including better governance, transparency and operational efficiency. It also calls for progress on privatisation and reducing the government’s role in commercial activities.
The latest recommendations highlight the importance of targeted relief, fiscal discipline and energy reforms as Pakistan works to maintain economic stability.
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