WASHINGTON: The International Monetary Fund (IMF) and Pakistan have struck a staff-level agreement on the latest reviews of the country’s economic programme. If the Fund’s Executive Board signs off, Pakistan could receive about $1.21 billion in new financing, the lender said in an official statement.
The deal covers the fourth review of Pakistan’s 37-month Extended Fund Facility (EFF) and the third review of its 28-month Resilience and Sustainability Facility (RSF). The IMF announced the outcome on Wednesday.
What Pakistan Stands to Receive
Once the Board approves, Pakistan will be able to draw roughly $1 billion under the EFF and $210 million under the RSF. That would take total disbursements under the two arrangements to about $5.7 billion.
An IMF team led by Iva Petrova met Pakistani officials in Karachi and Islamabad from September 23 to October 7. The talks covered the programme reviews as well as the 2026 Article IV consultation.
Economy Held Steady Despite Regional Conflict
The Fund said Pakistan kept its macroeconomic footing despite the fallout from the Middle East conflict. In its assessment, strong policies helped the economy cope with higher energy prices and supply disruptions.
Real GDP growth stood at 4% over the first three quarters of FY26, and full-year growth is estimated at 3.6%. Headline inflation eased to around 10.3% in September after peaking in May, while core inflation stayed contained.
The current account was broadly balanced in FY26, helped by strong remittances. Gross foreign exchange reserves climbed to about $21.5 billion by the end of September.
The IMF cautioned that risks remain high. It pointed to geopolitical tensions, volatile energy prices, tighter global financial conditions and trade disruptions.
Reform Priorities Set Out by the IMF
The Fund said the FY27 budget should be carried out firmly, with an underlying primary surplus target of 2% of GDP, to help put public debt on a sustainable downward path.
It also urged continued changes in revenue administration, including risk-based audits, digital invoicing and wider use of third-party data. The aim, it said, should be a simpler and fairer tax system.
Other recommendations included stronger public financial management, more efficient public investment and procurement, and lower debt rollover risks given Pakistan’s high financing needs.
On social spending, the IMF noted that health and education expenditure rose from 2.2% of GDP in FY24 to 2.5% in FY26. Authorities plan to lift it to 2.8% of GDP in FY27.
The Fund also called for timely energy tariff adjustments and cost-cutting steps to stop circular debt from building up again, along with efficiency gains in the power and gas sectors.
Monetary Policy and Exchange Rate
On monetary policy, the IMF said the State Bank of Pakistan should hold an appropriately tight stance so inflation returns sustainably to its target range. It also backed continued exchange-rate flexibility and further build-up of foreign exchange reserves.
Structural Reforms in the Article IV Assessment
The Article IV assessment pushed for structural changes to move Pakistan’s economy toward higher-value activities and close productivity gaps with peer countries.
The Fund highlighted the need to strengthen competition, ease regulatory and trade barriers, advance privatisation, improve the governance of state-owned enterprises, and reinforce governance and anti-corruption institutions.
According to the IMF, these steps, together with a fairer tax system, more investment in human and physical capital, a more efficient energy sector and deeper financial markets, would be important for boosting productivity, employment, private investment and exports.
Under the RSF, Pakistan has also made progress in building climate considerations into public investment planning and in strengthening disaster-risk financing.
The IMF agreement still needs approval from the Executive Board before any funds can be released.