ISLAMABAD: The International Monetary Fund and Pakistani authorities reached a staff-level agreement Thursday following two weeks of consultations, opening access to about $1.21 billion in financing subject to approval by the IMF Executive Board.
The agreement came after discussions under the 2026 Article IV consultation, the fourth review of the 37-month Extended Fund Facility and the third review of the 28-month Resilience and Sustainability Facility. The talks, held in Karachi and Islamabad from Sept. 23 to Oct. 7, were led by IMF Mission Chief Iva Petrova.
The disbursement comprises roughly $1.0 billion (SDR 760 million) under the EFF and $210 million (SDR 154 million) under the RSF, bringing cumulative drawdowns under both arrangements to approximately $5.7 billion.
Petrova said Pakistan preserved macroeconomic stability despite external shocks from the Middle East war and energy market disruptions. Real GDP growth reached 3.6 percent for fiscal year 2026, headline inflation moderated to 10.3 percent in September, and gross foreign exchange reserves rose to $21.5 billion, she said.
To maintain long-term debt sustainability, the agreement requires steadfast execution of the fiscal year 2027 budget, anchored by a primary surplus target of 2.0 percent of GDP. The framework calls for risk-based audits, digital invoicing and third-party data integration to support revenue collection.
Social protection mechanisms will be strengthened through increased health and education spending, reaching 2.8 percent of GDP in fiscal year 2027, along with expanded targeted cash transfers. Broad, high-cost fuel support schemes are set to be phased out promptly in favor of time-bound, targeted social assistance.
The policy framework commits the State Bank of Pakistan to maintaining an appropriately tight monetary policy stance to guide inflation back to target levels while preserving exchange rate flexibility as an economic shock absorber.
In the energy sector, the IMF emphasized timely tariff adjustments, circular debt prevention, cost recovery across gas networks, and expanded private sector participation in power distribution to enhance operational efficiency.
Structural priorities reviewed under the Article IV consultation focus on reforming state-owned enterprise governance, reducing trade barriers, improving anti-corruption institutions and enhancing market competition.
Climate adaptation objectives under the RSF mandate integrating climate risk assessments into public investment frameworks, reforming irrigation water pricing, establishing energy efficiency standards and accelerating transport decarbonization.
The agreement is scheduled for formal submission to the IMF Executive Board for final approval in the coming weeks.
