Staff-level deal reached with IMF for $1.2bn tranche
• Country set to receive $1bn under EFF, $210m under RSF
• Total IMF disbursements to reach $4.5bn under two arrangements
• Fund endorses govt’s fuel pricing policy amid Middle East crisis
ISLAMABAD: The International Monetary Fund (IMF) on Saturday announced that it had reached a staff-level agreement (SLA) with Pakistan for the disbursement of about $1.2 billion on successful conclusion of the third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).
The Fund also tacitly endorsed Islamabad’s fuel pricing policy in the wake of the Middle East crisis.
It said programme implementation by Pakistan under the EFF remained broadly aligned with the authorities’ objectives to strengthen public finances, ensure inflation remained durably within the State Bank of Pakistan’s (SBP) target range, advance reforms to improve the viability of the energy sector and deepen structural reforms while strengthening social protection and rebuilding health and education spending.
The authorities’ climate reform agenda, backed by the RSF, is progressing, and the authorities remain committed to implementing comprehensive reforms and policies that enhance resilience and reduce vulnerabilities to climate-related risks.
The talks were held in Karachi and Islamabad from Feb 25 to March 2 and continued virtually afterward.
IMF mission chief Iva Petrova said that, subject to IMF board approval, Pakistan would have access to about $1bn (760 million special drawing rights, or SDR) under the EFF and about $210m (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about $4.5bn.
“Supported by the EFF, ongoing policies have continued to strengthen the economy and rebuild market confidence. Following the recovery in FY25, economic activity gained further momentum in the first part of the current fiscal year. Inflation and the current account balance remained contained, and external buffers continued to strengthen,” the IMF said in a statement.
“The conflict in the Middle East, however, casts a cloud over the outlook as volatile energy prices and tighter global financial conditions risk putting upward pressure on inflation and weighing on growth and the current account,” it added.
The lender said the authorities remained committed to pursuing sound and prudent macroeconomic policies to preserve the recent gains in macro-financial stabilisation, while deepening structural reforms to accelerate growth and strengthening social protection to mitigate the impact of volatile energy prices on the most vulnerable.
The authorities’ policy priorities include maintaining a prudent fiscal stance, advancing fiscal structural reforms, strengthening poverty reduction and social protection, maintaining an appropriate monetary policy, achieving energy sector viability, deepening structural reforms and building resilience to climate change.
The Fund said the authorities remained committed to ensuring a sustainable fiscal position and reducing the still high public debt burden to more moderate levels over the medium term.
“To this end, efforts are ongoing to meeting the FY26 budget primary surplus of 1.6 per cent of GDP and to target an underlying primary balance of 2pc of GDP in FY27, supported by measures to broaden the tax base and strengthen expenditure discipline, while expanding health, education, and social protection spending, and strengthening federal‑provincial burden‑sharing,” it said.
Moreover, it said that “steadfast implementation” of fiscal reforms remained critical to achieving the fiscal objectives. “Revenue mobilisation efforts have already started to yield results, with the FBR implementing priority actions under its transformation plan and developing key performance indicators to monitor progress,” it added.
These priorities include strengthening taxpayer audits, expanding the use of digital invoicing and production monitoring and enhancing the FBR’s internal governance.
The newly established Tax Policy Office is developing a medium‑term tax reform strategy aimed at ensuring revenue neutrality and tax policy stability, said the statement.
In addition, efforts are underway to enhance fiscal burden‑sharing between federal and provincial governments and to strengthen public financial management.
Besides, to protect the most vulnerable from the recent elevated volatility in food and fuel prices, the authorities are aiming their efforts to provide more targeted and sustainable support to the more affected households and are strengthening the generosity, coverage, and delivery of the Benazir Income Support Programme (BISP), including through inflation‑adjusted cash transfers, expanded beneficiary coverage, and improved payment systems, the Fund said.
It also said that the SBP remained committed to keeping inflation within its target range and stands ready to raise interest rates should price pressures intensify, or inflation expectations rise, including from the passthrough of recent volatility in global food and fuel prices.
The IMF said that authorities remained committed to achieving energy sector viability and preventing a recurrence of circular debt, which was detrimental to the economy.
It said that sustainability must be maintained through timely tariff adjustments that ensure cost recovery. Moreover, energy price subsidies should be avoided, given their regressivity, high fiscal costs and distortionary impact.
“At the same time, the authorities remain committed to advancing structural reforms to improve efficiency, including by improving transmission and distribution, privatising inefficient generation companies, completing the transition to a competitive electricity market, and facilitating the shift toward renewable energy and rationalising capacity in line with demand while ensuring grid sustainability,” it added.
Moreover, the authorities were making progress in implementing broad‑based structural reforms aimed at strengthening governance, reducing inefficiencies and market distortions, easing excessive regulatory burdens, boosting productivity, and supporting private sector development, with a view to fostering durable growth while preserving macroeconomic stability and fiscal sustainability.
On building resilience to climate change, it said that “policies supported by the RSF, in line with national commitments — including recently implemented reforms to promote green mobility and transport decarbonisation and to strengthen climate information systems and the management of climate-related financial risks — are helping to build resilience”.
Published in Dawn, March 29th, 2026