Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement (SLA) on the fourth review of the country’s 37-month Extended Fund Facility (EFF) programme and the third review of its 28-month Resilience and Sustainability Facility (RSF).
The agreement is subject to approval by the IMF Executive Board. Once approved, Pakistan will receive about $1 billion under the EFF and approximately $210 million under the RSF.
The latest disbursements would take total funds released to Pakistan under the two programmes to around $5.7 billion, according to the IMF.
The two sides have also completed the IMF’s 2026 Article IV consultation.
The IMF said implementation of the EFF programme remained broadly on track despite a difficult external environment. It added that Pakistani authorities remained committed to maintaining macroeconomic stability, strengthening public finances, bringing inflation sustainably back within the State Bank of Pakistan’s target range, improving the energy sector and expanding social protection.
The government has also continued implementing reforms under the RSF aimed at strengthening Pakistan’s resilience to climate change and reducing vulnerabilities to climate-related risks.
An IMF team led by Iva Petrova held discussions with Pakistani authorities from September 23 to October 7 as part of the Article IV consultation, the fourth EFF review and the third RSF review.
According to the IMF, Pakistan’s economy has remained resilient despite external pressures and the impact of the Middle East conflict.
Real GDP growth reached 4 per cent during the first three quarters of fiscal year 2026. However, higher energy prices and supply disruptions affected economic momentum, with full-year growth estimated at 3.6pc.
Headline inflation eased to around 10.3pc in September after reaching a peak in May, while core inflation remained relatively contained.
The IMF said Pakistan’s current account was broadly balanced during FY26, supported by strong remittance inflows. Foreign exchange reserves increased to approximately $21.5 billion by the end of September.
The Fund also noted that sovereign credit-rating upgrades and renewed access to international capital markets indicated improved policy credibility.
However, it warned that significant risks remained, including geopolitical tensions, volatile energy prices, tighter global financial conditions and disruptions to international trade.
The IMF said Pakistan must maintain strong fiscal policies to protect macroeconomic stability amid a challenging external environment.
It described the effective implementation of the FY27 budget as critical, with the budget anchored by an underlying primary surplus target of 2pc of GDP.
The Fund said tax policy and revenue administration reforms would be essential to meeting revenue targets and placing public debt on a sustainable downward trajectory.
It highlighted measures including risk-based audits, digital invoicing and greater use of third-party data.
The IMF also called for a comprehensive medium-term tax reform strategy aimed at making the tax system simpler, fairer and more supportive of economic growth while protecting government revenues.
Pakistan is also expected to continue reforms to improve public financial management, including greater efficiency and transparency in budgeting, public investment, procurement and government cash management.
The Fund said authorities remained committed to reducing debt rollover risks and borrowing costs while developing the domestic government securities market and broadening the investor base
The IMF noted that Pakistan had reversed the long-term decline in spending on health and education, with expenditure increasing from 2.2pc of GDP in FY24 to 2.5pc in FY26.
The government plans to raise the allocation further to 2.8pc of GDP in FY27, while monitoring implementation and reallocating resources where necessary.
The planned increase in targeted cash-transfer benefits, along with improvements in beneficiary coverage and payment systems, is expected to strengthen support for vulnerable households.
The IMF also called for the fuel support scheme to be phased out promptly because of its high cost and broad coverage.
It said any future fuel support, if oil prices rise unexpectedly, should be limited, temporary and targeted through existing social protection programmes while remaining within the FY27 budget.
The IMF urged the State Bank of Pakistan (SBP) to maintain an appropriately tight monetary policy stance to ensure inflation returns sustainably to its target range.
It said exchange-rate flexibility should continue to act as an important buffer against external shocks.
The Fund also called for continued accumulation of foreign exchange reserves, gradual liberalisation of the foreign exchange regime and further development of domestic financial markets.
According to the IMF, these measures would strengthen Pakistan’s economic resilience and support private-sector development.
The IMF stressed the need for timely tariff adjustments and cost-reduction measures to prevent another build-up of circular debt while protecting vulnerable consumers.
It identified improving energy-sector efficiency, expanding private participation in electricity distribution, increasing competition in electricity markets, maintaining cost recovery in the gas sector and reducing unaccounted-for gas losses as key priorities.
The IMF’s Article IV consultation also examined measures aimed at transforming Pakistan’s economy towards higher-value-added activities and narrowing productivity gaps with comparable economies.
The Fund called for stronger competition, fewer regulatory and trade barriers, progress on privatisation, improved governance and transparency of state-owned enterprises and stronger institutions for governance and anti-corruption.
The IMF said a simpler and fairer tax system, greater public investment in human and physical capital, a more efficient energy sector and deeper financial markets would be important for increasing productivity, labour-force participation and job creation.
These reforms are also expected to support private investment and increase exports.
Under the RSF, Pakistan is continuing reforms aimed at strengthening resilience to climate change.
The IMF highlighted progress in incorporating climate considerations into public investment planning and improving disaster-risk financing and coordination.
Further reforms are underway in areas including irrigation water pricing and collection, better-targeted electricity subsidies, energy-efficiency standards and decarbonisation of the transport sector.
Pakistan and the IMF agreed on a 39-month, $7 billion programme in July 2024, aimed at consolidating macroeconomic stability and creating conditions for stronger, more inclusive and resilient economic growth.
In March 2025, the two sides reached a staff-level agreement on the first review of the EFF programme and on unlocking the RSF arrangement.
The IMF Executive Board subsequently approved a $1 billion EFF disbursement in May 2025, taking total funds released under the programme to about $2.1 billion. The Board also approved the RSF financing.
In October 2025, Pakistan and the IMF reached an SLA on the second EFF review. The agreement provided for another $1 billion under the EFF and $200 million under the RSF following approval by the IMF Executive Board in December.
An IMF mission led by Petrova held discussions with Pakistani authorities in March 2026 for the third EFF review and second RSF review. The two sides did not reach a staff-level agreement at that stage and agreed to continue negotiations.
In May 2026, the IMF Executive Board approved Pakistan’s access to approximately $1.1 billion under the EFF and around $220 million under the RSF, taking cumulative disbursements under the two arrangements to roughly $4.8 billion.
An IMF mission led by Petrova also visited Pakistan from May 13 to May 20 to review economic developments, implementation of reforms and the government’s FY27 budget strategy.
Finance Minister Muhammad Aurangzeb later held a wrap-up meeting with Petrova following the conclusion of the latest review.
