Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement, paving the way for the release of fresh financial support.
Pakistan and the IMF have finalized a staff-level agreement on the third review of the Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF).
The agreement is subject to approval by the IMF Executive Board. Once cleared, Pakistan will receive $1 billion under the EFF and approximately $210 million under the RSF.
This will bring total disbursements under both programs to around $4.5 billion.
Economic stability
According to the IMF, Pakistan’s economic performance has remained broadly aligned with program objectives.
Economic activity picked up after recovery in fiscal year 2025, with further momentum seen in the current fiscal year. Inflation and the current account have remained under control, while foreign exchange buffers have improved.
However, the IMF warned that Middle East tensions could impact the outlook through volatile energy prices and tighter global financial conditions.
Fiscal discipline and revenue reforms
Authorities have committed to maintaining fiscal discipline, targeting a primary surplus of 1.6% of GDP in FY26 and 2% in FY27.
Efforts are underway to broaden the tax base and improve expenditure management, while also increasing spending on health, education, and social protection.
FBR reforms gain momentum
The Federal Board of Revenue (FBR) is implementing reforms under its transformation plan.
Key measures include:
- Strengthening taxpayer audits
- Expanding digital invoicing and production monitoring
- Improving internal governance
A Tax Policy Office is also working on a medium-term reform strategy to ensure stability and neutrality in taxation.
Social protection and poverty reduction
The government has reaffirmed its commitment to protecting vulnerable groups.
The Benazir Income Support Programme (BISP) is being expanded through:
- Inflation-adjusted cash transfers
- Increased beneficiary coverage
- Improved payment systems
Authorities also plan to increase spending on health and education to support long-term human development.
Monetary policy to remain tight
The State Bank of Pakistan will continue a data-driven and tight monetary policy to keep inflation within target.
The IMF noted that interest rates may be increased further if inflationary pressures rise, especially due to fluctuations in global food and fuel prices.
Exchange rate flexibility will remain a key tool to absorb external shocks.
Energy sector reforms and circular debt
The IMF stressed the importance of achieving energy sector viability.
Authorities have committed to:
- Ensuring timely tariff adjustments for cost recovery
- Avoiding untargeted subsidies
- Reducing circular debt
Reforms will also focus on improving transmission, privatizing inefficient companies, and transitioning toward renewable energy.
Structural reforms and privatization
Pakistan is pushing ahead with broader structural reforms aimed at:
- Strengthening governance
- Reducing regulatory barriers
- Promoting private sector growth
The privatization of state-owned enterprises and reduced government intervention in markets remain central to the reform agenda.
Anti-corruption efforts and institutional capacity-building are also being intensified.
Climate resilience efforts
Under the RSF, Pakistan is advancing reforms to address climate risks.
Progress has been made in:
- Promoting green mobility
- Strengthening climate information systems
- Managing climate-related financial risks
Future priorities include improving water resilience, disaster risk financing, and aligning energy reforms with climate goals.
The agreement follows earlier IMF support, including a $1.2 billion tranche released in December 2025.
In 2024, the IMF approved a $7 billion bailout package for Pakistan, forming the basis of ongoing reforms.
