Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement (SLA) that will unlock $1.2 billion in new financing under the Fund’s ongoing support programmes, the global lender announced on Wednesday. The agreement, which remains subject to approval by the IMF Executive Board, marks a major step forward in Pakistan’s efforts to stabilize its economy amid fiscal and climate-related challenges.
According to the IMF, the agreement includes $1 billion under the Extended Fund Facility (EFF) and $200 million under the Resilience and Sustainability Facility (RSF) — bringing total disbursements under the two arrangements to about $3.3 billion.
The announcement followed weeklong discussions between the IMF mission led by Iva Petrova and Pakistani authorities, which concluded recently in Islamabad and Washington. The talks were part of the second review under the EFF and the first review of the RSF, which aims to support climate resilience and sustainable growth.
In a statement, Petrova said Pakistan’s economic recovery “remains on track,” supported by prudent fiscal management and improved investor confidence.
“Supported by the EFF, Pakistan’s economic programme is entrenching macroeconomic stability and rebuilding market confidence,” she said. “The recovery remains on track, with the FY25 current account recording a surplus — the first in 14 years — the fiscal primary balance surpassing the programme target, inflation remaining contained, external buffers strengthening, and financial conditions improving.”
However, she cautioned that recent floods have weighed on the country’s agricultural outlook, bringing down projected FY26 GDP growth to between 3.25 and 3.5 percent.
“The floods underscore Pakistan’s high vulnerability to natural disasters and substantial climate-related risks, and the continuing need to build climate resilience,” Petrova noted, extending condolences to those affected.
The IMF stated that Pakistani authorities have reaffirmed their commitment to maintaining sound macroeconomic policies and advancing structural reforms under the Fund-supported programmes.
“The authorities remain committed to meeting the FY26 budget primary surplus of 1.6 percent of GDP,” Petrova said, adding that fiscal discipline will be supported through improved tax compliance, broadened revenue measures, and continued public sector reforms.
She highlighted that the government is simultaneously working to mobilize revenue, enhance federal-provincial coordination in tax collection, and strengthen public financial management. A newly established Tax Policy Office will lead medium-term reforms to simplify the tax code and reduce reliance on ad hoc taxation.
The IMF also underscored Pakistan’s efforts to expand social safety nets. The Benazir Income Support Programme (BISP) will be strengthened to enhance coverage and generosity, while the government plans to scale up non-BISP health and education spending to support inclusive growth.
The State Bank of Pakistan (SBP), meanwhile, remains committed to a “prudent monetary policy stance” to keep inflation within the target range of 5–7 percent. The central bank will adjust its policy if inflationary pressures rise or expectations become unanchored.
Addressing the energy sector, Petrova said Pakistan is committed to preventing the re-accumulation of circular debt through timely tariff adjustments and efficiency improvements.
“Structural reforms continue to focus on enhancing the performance, efficiency, and governance of distribution companies, including through privatisation; upgrading the transmission system; and completing the transition to a competitive electricity market,” she said.
The Fund also acknowledged ongoing efforts to improve governance, foster private sector development, and reduce the state’s footprint in the economy — particularly through reforms in state-owned enterprises (SOEs) and commodity markets.
Under the RSF, Pakistan will continue advancing reforms aligned with its national climate commitments, including green transport initiatives, water management improvements, and frameworks for disaster risk financing.
“The recent floods and those of 2022 highlight the urgency of strengthening climate resilience,” Petrova emphasized. “Policies supported by the RSF are helping Pakistan transition toward sustainable, climate-resilient growth.”
The IMF Executive Board is expected to review the SLA in the coming weeks, after which the disbursement of $1.2 billion will be released. Finance Minister Muhammad Aurangzeb, currently in Washington, had earlier expressed confidence that the agreement would be finalized this week.
The agreement signals continued IMF confidence in Pakistan’s reform trajectory — a key factor in maintaining external financing, investor confidence, and macroeconomic stability.
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