Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement under the Extended Fund Facility (EFF), securing a $1 billion tranche. The deal, which is subject to board approval, also includes a $1.3 billion package under the Resilience and Sustainability Facility (RSF). This brings the total financial support from the IMF to $2.3 billion.
In a statement released on Wednesday, the IMF acknowledged Pakistan’s efforts in stabilizing its economy despite global challenges. The Fund noted improvements in fiscal management, a decline in inflation, and stability in external balances. However, it warned that Pakistan still faces risks due to global geopolitical tensions, fluctuating commodity prices, and climate-related challenges.
The agreement follows extensive discussions between IMF officials and Pakistani authorities. A delegation led by Nathan Porter held meetings from February 24 to March 14 in Karachi and Islamabad. The discussions focused on fiscal reforms, economic stability, and structural improvements in key sectors.
Economic Reforms and Future Plans
The IMF stressed the importance of continued economic reforms, particularly in taxation, energy, and governance. It urged Pakistan to expand its tax base by effectively implementing agricultural income tax. The Fund also recommended phasing out subsidies in the energy sector. Additionally, it called for strict monetary policies to control inflation, aiming for a medium-term target of 5-7%.
Pakistani officials assured the IMF of their commitment to fiscal discipline. They pledged to sustain ongoing economic reforms while ensuring social welfare programs remain intact. The government has promised to prioritize spending in health, education, and climate resilience initiatives. The Benazir Income Support Programme (BISP) will continue to receive funding to support vulnerable communities.
Energy Reforms and Climate Resilience
The IMF highlighted the urgency of implementing electricity and gas tariff adjustments. It stressed the need to reduce circular debt by improving efficiency in power transmission and distribution. Governance reforms in the Pakistan Sovereign Wealth Fund were also discussed to enhance investment potential.
Under the RSF, the $1.3 billion package will support climate resilience projects. These include better water resource management, expansion of renewable energy, and initiatives for green transportation to combat urban pollution. The IMF emphasized the importance of long-term strategies to strengthen Pakistan’s economic and environmental sustainability.
IMF Board Approval and Future Challenges
The IMF Executive Board is expected to review the agreement in May. Once approved, Pakistan will receive the $1 billion tranche under the EFF. The additional $1.3 billion under the RSF will be disbursed over 28 months.
As of March 14, Pakistan’s foreign exchange reserves stand at $11.15 billion. The IMF-backed program is crucial for maintaining economic stability and boosting investor confidence. Analysts see the agreement as a roadmap for long-term structural reforms. However, the IMF cautioned against premature policy changes, external economic shocks, and trade restrictions. It urged Pakistan to stay committed to its reform agenda to achieve sustainable economic growth.
