IMF reaches staff-level agreement with Pakistan, unlocks $1.2bn disbursement
- EFF and RSF reviews conclude successfully.
- Total disbursements may rise to $4.5bn.
- IMF flags Middle East conflict risks.
The International Monetary Fund (IMF) said on Friday it had reached a staff-level agreement with Pakistan on the third review of its Extended Fund Facility and the second review of its Resilience and Sustainability Facility (RSF), with the country receiving a disbursement of about $1.2 billion.
A statement issued by the IMF said that the agreement was reached on 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 RSF.
The staff-level agreement is subject to approval by the IMF Executive Board.
Upon approval, the global lender said, Pakistan will have access to about $1.0 billion under the EFF and about $210 million under the RSF, bringing total disbursements under the two arrangements to about $4.5 billion.
“Supported by the EFF, ongoing policies have continued to strengthen the economy and rebuild market confidence,” the Fund said in a statement.
It added that economic activity had gained momentum, inflation and the current account had remained contained, and external buffers had continued to strengthen, although the conflict in the Middle East had clouded the outlook by raising the risk of volatile energy prices, tighter global financial conditions, higher inflation, and pressure on growth and the external account.
As part of the process leading to the staff-level agreement, Pakistani authorities and the IMF exchanged drafts of the Memorandum of Economic and Financial Policies after finalising key outlines of the 2026–27 budget, according to background details from The News.
The report said the Fund had sought a fiscal framework centred on an FBR tax collection target of Rs15.08 trillion for the next fiscal year.
The same report said the IMF had also urged Islamabad to revise petroleum, oil and lubricant prices more frequently to better reflect international market movements. Pakistan has already moved from fortnightly to weekly price adjustments, while officials were said to be discussing how much more frequently prices should be reset.
In its today’s statement, the IMF said the authorities’ policy priorities include maintaining a prudent fiscal stance, broadening the tax base, strengthening expenditure discipline, expanding health, education and social protection spending, and improving federal-provincial burden-sharing.
The Fund said revenue mobilisation efforts were already yielding results, with the FBR pursuing priority actions under its transformation plan, including stronger taxpayer audits, wider use of digital invoicing and production monitoring, and improved internal governance. It added that the Tax Policy Office was developing a medium-term reform strategy aimed at revenue neutrality and tax policy stability.
The IMF also said the State Bank of Pakistan should maintain an appropriately tight and data-dependent monetary policy and stand ready to raise interest rates if price pressures intensify, including from swings in global food and fuel prices.
It added that exchange-rate flexibility should remain the primary shock absorber against external spillovers, including those stemming from the Middle East conflict.
On the energy side, the Fund said, “Sustainability must be maintained through timely tariff adjustments that ensure cost recovery,” while untargeted energy subsidies should be avoided.
It also pointed to structural reforms aimed at reducing circular debt, improving transmission and distribution, privatising inefficient generation companies, completing the transition to a competitive electricity market, and facilitating the shift towards renewable energy.
The IMF further said the authorities remained committed to strengthening the Benazir Income Support Programme (BISP) through inflation-adjusted cash transfers, wider beneficiary coverage and improved payment systems to protect vulnerable households from food and fuel price volatility.
It also highlighted broader reform goals, including SOE reform, privatisation, anti-corruption efforts and climate resilience measures under the RSF.
