The International Monetary Fund (IMF) on Tuesday announced that it has reached a staff-level agreement with Pakistan to release $1.2 billion in fresh funding after completing its latest programme review.
The agreement, which remains subject to approval by the IMF Executive Board, comprises $1 billion under the Extended Fund Facility (EFF) and $200 million under the Resilience and Sustainability Facility (RSF). Once approved, total disbursements under both arrangements will reach around $3.3 billion.
According to the IMF, discussions led by Iva Petrova were held in Islamabad between September 24 and October 8 to review progress under Pakistan’s ongoing economic programmes — the 37-month Extended Arrangement under the EFF and the 28-month arrangement under the RSF.
“Supported by the EFF, Pakistan’s economic programme is entrenching macroeconomic stability and rebuilding market confidence. The recovery remains on track, with the FY25 current account recording a surplus — the first in 14 years,” the IMF said in a statement.
The lender also acknowledged that Pakistan has remained firm in implementation of the EFF-supported programme, saying, “The authorities are committed to sustaining the fiscal effort to strengthen public finances while providing needed support to the victims of the recent floods; ensuring inflation remains durably within the SBP’s target range; restoring the viability of the energy sector; and advancing structural reforms.”
It added that Pakistan’s fiscal primary balance had surpassed the programme target, inflation remained contained, and external buffers were strengthening amid improving financial conditions and narrowing sovereign spreads.
However, the Fund noted that the recent floods — which have affected nearly seven million people, caused over 1,000 deaths, and inflicted severe damage to housing, infrastructure, and farmland — had weighed on the economic outlook, particularly in the agriculture sector. The damage, it said, had lowered the FY26 GDP projection to between 3.25 and 3.5 percent.
The IMF emphasised that the disaster underscored Pakistan’s high vulnerability to climate-related shocks and the pressing need to strengthen climate resilience.
The Pakistani authorities, it said, reaffirmed their commitment to maintaining prudent macroeconomic policies and advancing structural reforms under both programmes.
Key policy priorities include continuing fiscal consolidation, strengthening poverty reduction measures, improving revenue mobilisation, maintaining a tight and data-driven monetary policy, restoring the energy sector’s financial health, and advancing climate resilience initiatives.
The government remains committed to achieving a FY26 primary budget surplus of 1.6% of GDP through sustained tax policy and compliance efforts. It is also providing emergency flood relief through reallocations within federal and provincial budgets.
The IMF noted progress in fiscal reforms, including the establishment of a new tax policy office to simplify the tax code and reduce reliance on ad hoc measures. Collaboration between federal and provincial governments is being deepened to improve revenue sharing and financial management.
Meanwhile, the State Bank of Pakistan remains focused on maintaining inflation within its target range of 5–7%, adjusting its policy stance as needed based on evolving economic conditions.
In the energy sector, the authorities have pledged to prevent further accumulation of circular debt by ensuring cost-reflective tariffs, while continuing privatisation and efficiency improvements in distribution and generation companies.
Reforms are also under way to boost private sector development, improve governance, and reduce state intervention in the economy. Plans include measures to enhance trade competitiveness and productivity, as well as reforms in the agriculture sector to ensure food security.
Under the RSF, Pakistan aims to strengthen resilience against climate change through green mobility initiatives, improved disaster risk financing, and enhanced water system management.
“The IMF team expresses its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector, and development partners for their cooperation and hospitality throughout this mission,” the statement added.
