The International Monetary Fund has struck a deal with Pakistan that could release approximately $1.2 billion in new funding. This agreement comes as Pakistan continues its efforts in fiscal discipline, structural reforms, and actions to stabilize inflation and growth. The agreement stems from discussions between the IMF team and Pakistani authorities regarding reviews under the Extended Fund Facility and the Resilience and Sustainability Facility.
Pakistan is set to receive around $1.0 billion under the Extended Fund Facility and about $210 million under the Resilience and Sustainability Facility upon approval by the IMF’s Executive Board. This would bring the total disbursements under these programs to nearly $4.5 billion. The IMF highlighted that Pakistan’s program implementation has been in line with objectives such as strengthening public finances, managing inflation, and advancing structural reforms.
Economic indicators in Pakistan have shown improvement, with economic activity picking up momentum after a recovery in FY25. Despite positive developments, risks remain, particularly due to potential impacts from conflicts in the Middle East. The IMF cautioned that Pakistan could face challenges from volatile energy prices and tighter global financial conditions.
To address fiscal concerns, Pakistan aims to reduce public debt by maintaining a prudent fiscal stance. The country is targeting a primary surplus of 1.6% of GDP in FY26 and 2% in FY27. Revenue mobilization is a key focus, with the Federal Board of Revenue implementing reforms like enhanced taxpayer audits and expanded digital monitoring systems.
The State Bank of Pakistan is expected to stay vigilant on monetary policy, with readiness to adjust interest rates if inflationary pressures rise. Exchange rate flexibility is seen as a buffer against economic shocks. Energy sector reforms are central to the program, with efforts to prevent circular debt, ensure cost recovery through tariff adjustments, and promote privatization and efficiency enhancements.
