Pakistan and IMF Reach $1.21 Billion Staff-Level Agreement

Islamabad: Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement for $1.21 billion under two separate financial programs. Under the agreement, Pakistan will receive $1 billion upon completion of the fourth review of the Extended Fund Facility (EFF), along with $210 million under the Resilience and Sustainability Facility (RSF). Following the disbursement of these funds, the total amount Pakistan receives under the two programs will rise to $5.7 billion.

According to the IMF, Pakistan has made progress in maintaining economic stability despite challenging global and regional conditions. Economic growth stood at 4% during the first nine months of 2026, while the growth rate for the full year is projected at 3.6%. The Fund said inflation declined to 10.3% in September after reaching a high level in May. The current account also remained balanced due to a significant increase in remittances, while foreign exchange reserves reached $21.5 billion by the end of September.

The IMF described improvements in Pakistan’s sovereign credit rating and the country’s renewed access to international financial markets as signs of growing confidence in its economic policies. However, it identified geopolitical tensions, fluctuations in energy prices, global financial conditions and trade barriers as major risks to the economy.

The IMF urged Pakistan to maintain fiscal discipline and retain a target of a primary budget surplus equivalent to 2% of gross domestic product (GDP) in the fiscal year 2027 budget. It also recommended simplifying the tax system and creating a more business-friendly environment. To improve tax collection, the Fund emphasized expanding the use of digital invoicing, audits and third-party data. Increasing allocations for the health and education sectors was also identified as a priority. The IMF proposed increasing cash assistance for low-income households while urging the government to eliminate broad-based fuel subsidies. According to the Fund, if oil prices rise exceptionally in the future, financial assistance should be restricted to eligible and vulnerable groups.

The State Bank of Pakistan was advised to maintain an appropriately tight monetary policy to control inflation, allow flexibility in the rupee’s exchange rate and further strengthen foreign exchange reserves. In the energy sector, key reforms include timely adjustments to electricity and gas tariffs, controlling circular debt, encouraging private-sector participation in electricity distribution and reducing losses in the gas sector. The Fund also called for progress in privatization, improvements in the performance and transparency of state-owned enterprises, stronger business competition, fewer trade and regulatory barriers, and institutional measures to combat corruption. According to the IMF, Pakistan has made significant progress toward economic stability. However, continued economic reforms remain essential in view of inflation, energy prices, debt-related pressures and uncertainty in the global and regional environment.