ISLAMABAD: Pakistan and International Monetary Fund (IMF) staff reached an agreement on programme reviews, the lender announced on Wednesday. Pakistan could access about $1.21 billion after the IMF Executive Board approves the deal.
Approval would provide about $1 billion under the Extended Fund Facility (EFF) and $210 million under the Resilience and Sustainability Facility (RSF). Total disbursements across both arrangements would then reach about $5.7 billion.
The agreement covers the fourth review of the 37-month EFF and the third review of the 28-month RSF.
IMF mission chief Iva Petrova led discussions in Karachi and Islamabad from September 23 to Wednesday. Talks included the 2026 Article IV consultation.
According to the IMF, strong policies helped Pakistan preserve macroeconomic stability despite higher energy prices and supply disruptions from the Middle East conflict. However, it warned that geopolitical tensions, volatile energy costs, tighter global financing conditions and trade disruptions posed substantial risks.
Its assessment put real gross domestic product (GDP) growth at 4% during the first three quarters of FY2025-26 (July–June). It estimated full-year growth at 3.6%.
Headline inflation eased to about 10.3% in September after its May peak, while core inflation remained contained. IMF figures put gross foreign exchange reserves at about $21.5 billion at the end of September. Strong remittances helped keep the current account broadly balanced in FY26, the lender said.
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For FY2026-27 (July–June), the IMF urged firm budget implementation and an underlying primary surplus of 2% of GDP. It linked that target to reducing public debt sustainably.
Revenue priorities include risk-based audits, digital invoicing and greater use of third-party data. Alongside a simpler, fairer tax system, the lender sought better public investment and procurement practices and lower debt rollover risks.
Health and education spending increased from 2.2% of GDP in FY2023-24 (July–June) to 2.5% in FY26. Authorities plan to raise that share to 2.8% in FY27.
On energy, the IMF called for timely tariff adjustments and cost reductions to prevent further circular debt accumulation. It sought greater efficiency across power and gas operations.
Monetary recommendations included an appropriately tight State Bank of Pakistan stance to return inflation sustainably to its target range. IMF staff backed exchange-rate flexibility and further reserve accumulation.
Its structural reform agenda covered stronger competition, fewer regulatory and trade barriers, privatisation, better governance of state-owned enterprises and stronger anti-corruption institutions. Other priorities included investment in people and infrastructure and deeper financial markets.
Under the RSF, Pakistan made progress incorporating climate considerations into public investment planning and strengthening disaster-risk financing, the IMF said.
(With additional input from The News)
