IMF Talks Near Completion
Pakistan and the International Monetary Fund (IMF) are finalising discussions on the fourth review of the $7 billion Extended Fund Facility (EFF) and the third review of the $1.4 billion Resilience and Sustainability Facility (RSF).
The talks are expected to clear the way for around $1.2 billion in combined disbursements, subject to completion of the review process and approval by the IMF’s Executive Board. The amount includes about $1 billion under the EFF and $200 million under the RSF.
Pakistani officials and the IMF mission have also been working on the Memorandum of Economic and Financial Policies (MEFP), which is a key document for completing the review. The IMF mission, led by Iva Petrova, is expected to conclude its visit shortly.
Sugar and Economic Reforms
Sugar sector reforms remain among the issues discussed during the review. Earlier IMF concerns included government intervention in commodity markets, particularly sugar and wheat.
The IMF programme requires Pakistan to reduce interventions in commodity markets. Provincial coordination has also been an important part of discussions around the sugar sector.
However, the latest talks have not resulted in a major list of new demands, according to officials cited in recent reporting. Instead, discussions have focused on addressing earlier policy slippages and completing measures required for the review.
Monetary Policy and Fuel Subsidies
Monetary policy is also being closely watched as Pakistan faces elevated inflation and higher international energy prices. The State Bank of Pakistan kept its policy rate at 11.5 percent earlier this month, while inflation remained above 10 percent in August and September.
The government and IMF have also been discussing targeted energy subsidies. A key part of the plan is to shift electricity support for low-income consumers towards targeted assistance through the Benazir Income Support Programme (BISP).
The government has committed to replacing broad tariff subsidies and cross-subsidies with a more targeted system for eligible low-income consumers.
Energy Sector Remains a Major Concern
Energy sector reforms remain an important part of the IMF programme. The government has assured the Fund that it will work to reduce cross-subsidies and contain rising circular debt in the gas sector.
Gas-sector circular debt has reportedly reached around Rs3.6 trillion, increasing pressure on the government to address tariff structures and accumulated liabilities.
The government is also working on targeted gas subsidies through the social protection system. The aim is to provide support to poorer consumers while reducing the financial burden created by broader subsidies.
Health and Education Spending
Health and education spending targets remain another issue between the federal government, provinces and the IMF.
Provincial governments have previously struggled to meet spending commitments under the IMF programme. The Fund has continued to monitor provincial fiscal performance and the implementation of agreed targets.
The provinces also face broader financial pressures because of commitments to provide cash surpluses to the federal government. These fiscal constraints could make it difficult to increase spending while maintaining the targets agreed under the IMF programme.
What Happens Next?
The IMF review is now moving towards its final stage. Officials are working to complete the MEFP and address remaining policy issues and past target slippages.
If the review is successfully completed, Pakistan could receive around $1.2 billion under the two IMF programmes. The disbursement will still require consideration and approval by the IMF’s Executive Board.
The latest developments suggest that the talks are moving towards completion, although Pakistan may still need waivers for some missed structural benchmarks. The government is also expected to take additional steps on energy subsidies, gas-sector reforms and other commitments under the programme.
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