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The International Monetary Fund (IMF) has stated that it has achieved a staff-level agreement (SLA) for the release of approximately $1.2 billion, contingent upon the successful completion of the third review under Pakistan’s Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).

“The IMF team has achieved a staff-level agreement with the Pakistani authorities regarding the third review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and the second review of the 28-month arrangement under the Resilience and Sustainability Facility (RSF,” stated the IMF in a press release. The staff-level agreement requires approval from the IMF Executive Board. Once approved, Pakistan will be eligible to receive approximately US$1.0 billion (SDR 760 million) under the EFF and around US$210 million (SDR 154 million) under the RSF, resulting in total disbursements under both arrangements reaching approximately US$4.5 billion.

A team from the International Monetary Fund (IMF), headed by Ms. Iva Petrova, conducted talks regarding the third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF) in Karachi and Islamabad between February 25 and March 2, 2026, with virtual meetings continuing thereafter.

Backed by the EFF, existing policies have kept enhancing the economy and restoring market trust. After the recovery in FY25, economic activity saw more growth during the initial phase of the current fiscal year. Inflation and the current account deficit stayed under control, and external reserves kept improving. However, the conflict in the Middle East poses a challenge to the outlook, as fluctuating energy prices and stricter global financial conditions could push inflation higher and negatively affect growth and the current account.

The officials are determined to continue implementing wise and cautious macroeconomic strategies to maintain the recent progress in macro-financial stability, while advancing structural reforms to boost growth and enhancing social safety nets to reduce the effects of fluctuating energy costs on the most vulnerable groups.

The government’s focus areas are as follows:

Adopting a cautious financial approach. The authorities continue to be dedicated to maintaining a sustainable fiscal position and lowering the currently high public debt to more reasonable levels in the medium term. To achieve this, initiatives are underway to meet the FY26 budget primary surplus of 1.6 percent of GDP and aim for an underlying primary balance of 2 percent of GDP in FY27, backed by actions to expand the tax base and enhance spending control, while increasing investments in health, education, and social protection, and reinforcing federal-provincial sharing of responsibilities.

Carrying out financial structural reforms. Consistent execution of financial reforms is still essential for meeting financial goals. Initiatives to boost revenue have already begun to show outcomes, as the FBR has started implementing key actions under its transformation plan and is creating important performance metrics to track progress. These priorities involve improving taxpayer audits, increasing the use of digital invoicing and production monitoring, and improving the FBR’s internal governance. The newly formed Tax Policy Office is working on a medium-term tax reform strategy designed to maintain revenue neutrality and stability in tax policy. Moreover, efforts are being made to improve the sharing of fiscal responsibilities between federal and provincial governments and to strengthen public financial management.

Enhancing efforts to reduce poverty and improve social protection. In order to safeguard the most vulnerable individuals from the current high levels of fluctuation in food and fuel prices, the authorities are focusing their initiatives on delivering more focused and long-term assistance to those most impacted by these challenges. They are also enhancing the generosity, reach, and efficiency of the Benazir Income Support Program (BISP), through mechanisms such as inflation-adjusted cash transfers, broader inclusion of beneficiaries, and more effective payment methods. At the same time, they continue to be dedicated to increasing federal and provincial investments in health and education, in line with program goals, to foster human capital growth and equitable development.

Implementing a suitably tight and data-sensitive monetary policy. The State Bank of Pakistan (SBP) is dedicated to maintaining inflation within its target range and is prepared to increase interest rates if price pressures grow or inflation expectations rise, including due to the transmission of recent fluctuations in global food and fuel prices. Exchange rate flexibility should continue to act as the main buffer, especially concerning spillovers from the conflict in the Middle East, while the SBP must ensure that the banking system can handle import financing and other external payments despite possible heightened balance of payments challenges.

Ensuring the sustainability of the energy sector. The authorities are determined to ensure the viability of the energy sector and avoid a reoccurrence of circular debt, which negatively affects the economy. It is essential to maintain sustainability through timely tariff adjustments that guarantee cost recovery. Additionally, energy price subsidies should be avoided due to their regressive nature, high fiscal burden, and tendency to distort the market. Meanwhile, the authorities are dedicated to implementing structural reforms to enhance efficiency, such as improving transmission and distribution systems, privatizing underperforming generation companies, finalizing the move toward a competitive electricity market, and promoting the transition to renewable energy while rationalizing capacity in accordance with demand, all while ensuring the stability of the power grid.

Continuing structural reforms. The government is advancing comprehensive structural reforms designed to enhance governance, cut down on inefficiencies and market distortions, alleviate excessive regulatory pressures, boost productivity, and support the growth of the private sector, with the aim of achieving sustained growth while maintaining macroeconomic stability and fiscal responsibility. Progress in reforming state-owned enterprises and the privatization strategy remains crucial for reducing the state’s role and improving service provision, along with initiatives to minimize government involvement in commodity markets and encourage private sector activities. The government is also enhancing institutional capabilities and intensifying anti-corruption measures to promote equitable growth and ensure a fair environment for businesses and investments.

Enhancing resistance to the impacts of climate change. Initiatives backed by the RSF, in accordance with national pledges—including new reforms aimed at encouraging eco-friendly transportation and reducing carbon emissions in the transport sector, as well as improving climate data systems and handling financial risks associated with climate change—are contributing to the development of resilience. The government continues to be dedicated to implementing additional reforms, such as improving the resilience of water systems, more effectively recognizing and prioritizing climate-related expenditures, creating a unified disaster risk financing structure, and ensuring energy sector reforms align with national emission reduction goals.

The IMF team appreciates the Pakistani government, private industry, and development allies for their warm welcome during the trip to Islamabad and Karachi, as well as the productive conversations held.

Provided by SyndiGate Media Inc.Syndigate.info).