Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) on key reviews of its ongoing financial support programs, bringing the country closer to unlocking new external financing worth about $1.2 billion.
The agreement covers the third review of Pakistan’s 37-month Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF). Final approval now rests with the IMF Executive Board. Once endorsed, Pakistan will gain access to roughly $1 billion under the EFF and about $210 million through the climate-focused RSF arrangement, raising total disbursements under both programs to nearly $4.5 billion.
The IMF said implementation of the reform program remains broadly aligned with agreed objectives, including fiscal consolidation, inflation control, energy-sector restructuring, and wider structural reforms aimed at strengthening economic stability and rebuilding market confidence.
Economic activity has continued to recover following growth momentum seen in fiscal year 2025, while inflation pressures and the current account deficit have remained contained. External buffers have improved, though global risks—particularly geopolitical tensions in the Middle East—continue to threaten the outlook through volatile energy prices and tighter global financial conditions.
Pakistani authorities reaffirmed their commitment to prudent macroeconomic management to preserve recent stabilization gains while expanding targeted social protection to cushion vulnerable households from rising food and energy costs.
Under the program framework, the government aims to maintain fiscal discipline by achieving a primary surplus of 1.6 percent of GDP in FY2026 and moving toward a 2 percent surplus in FY2027. These targets are supported by measures to widen the tax base, strengthen expenditure management, and improve fiscal coordination between federal and provincial governments.
Tax reforms remain a central pillar of the program, with the Federal Board of Revenue advancing digital invoicing, enhanced audit mechanisms, production monitoring systems, and internal governance improvements. A newly created Tax Policy Office is preparing a medium-term strategy focused on stable and sustainable revenue mobilization.
Authorities also plan to expand social safety nets through stronger and more targeted support under the Benazir Income Support Programme, including inflation-adjusted cash transfers and wider beneficiary coverage, alongside increased investment in health and education.
The IMF emphasized the importance of maintaining a tight, data-driven monetary policy stance to keep inflation within the State Bank of Pakistan’s target range. Exchange rate flexibility will continue to serve as a key buffer against external shocks and balance-of-payments pressures.
Energy-sector reforms remain critical to the program, with the government committed to preventing a renewed buildup of circular debt through timely tariff adjustments, reduced reliance on subsidies, efficiency improvements in transmission and distribution, privatization of underperforming power assets, and a gradual shift toward renewable energy and a competitive electricity market.
Broader structural reforms are also underway to improve governance, reduce regulatory bottlenecks, advance privatization of state-owned enterprises, strengthen anti-corruption frameworks, and promote private-sector-led growth.
Climate-related reforms supported by the RSF are progressing as well, focusing on green mobility initiatives, improved climate risk management, stronger water system resilience, and the development of a coordinated disaster risk financing framework.
The IMF mission, led by Iva Petrova, held discussions with Pakistani authorities in Karachi and Islamabad between late February and early March before finalizing the staff-level agreement following virtual consultations. Executive Board approval will formally clear the next tranche of financing and mark another step in Pakistan’s ongoing economic reform program.
