The International Monetary Fund has urged Pakistan to limit petroleum subsidies to deserving people, phase out costly fuel support schemes and accelerate energy sector reforms to contain economic pressures.

In a statement, the fund also called for a cautious fiscal policy to control inflation and said financial assistance during periods of rising oil prices should be targeted and temporary rather than extended through broad fuel subsidies.

Pakistan’s economy grew by 4 percent between July 2025 and March 2026, but growth is projected to slow to 3.6 percent due to the effects of the Middle East crisis, according to the statement.

Inflation reached its highest level in May 2026, while remittances from overseas Pakistanis helped keep the current account deficit under control.

The IMF also called for better recovery of outstanding payments in the energy sector, lower gas losses and measures to reduce production costs. It said timely adjustments in energy prices and cost-cutting reforms were necessary.

The fund said the State Bank of Pakistan should maintain a sufficiently tight monetary policy to control inflation. It also urged Pakistan to take measures to increase its foreign exchange reserves.

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 paves the way for approximately $1.2 billion in additional financing, subject to approval by the IMF Executive Board.

The agreement is linked to broader structural reforms, including improving the governance, transparency and operational efficiency of state-owned enterprises, advancing privatisation, and reducing the government’s role in commercial activities.