ISLAMABAD (MNN); The International Monetary Fund has 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, paving the way for disbursements of around $1.2 billion, subject to Executive Board approval.
According to the IMF, Pakistan will gain access to about $1.0 billion under the Extended Fund Facility and approximately $210 million under the Resilience and Sustainability Facility once approved. This would bring total disbursements under the programmes to around $4.5 billion.
The Fund noted that economic conditions in Pakistan have improved, with growth gaining momentum, inflation remaining under control, and external buffers strengthening. However, it cautioned that the ongoing Middle East conflict poses risks through volatile energy prices, tighter financial conditions, and potential pressure on growth.
As part of the agreement process, Pakistan and the IMF finalised key outlines of the 2026–27 budget, including a proposed tax collection target of Rs15.08 trillion for the Federal Board of Revenue.
The IMF also urged Pakistan to frequently adjust petroleum prices in line with global market trends. The country has already shifted from fortnightly to weekly price revisions, with further adjustments under consideration.
The Fund emphasized key policy priorities, including maintaining fiscal discipline, expanding the tax base, improving expenditure management, and increasing spending on health, education, and social protection.
It also highlighted progress in tax reforms, including enhanced audits, digital invoicing, production monitoring, and improved governance. A medium-term tax strategy is being developed to ensure stability and neutrality.
The IMF advised the State Bank of Pakistan to maintain a tight, data-driven monetary policy and remain ready to raise interest rates if inflationary pressures increase.
On the energy front, the Fund stressed the importance of timely tariff adjustments to ensure cost recovery and warned against untargeted subsidies. It also called for structural reforms to reduce circular debt, privatise inefficient power companies, and transition towards a competitive and renewable energy market.
The IMF further reaffirmed support for strengthening the Benazir Income Support Programme through expanded coverage and inflation-adjusted cash transfers to protect vulnerable populations.
Broader reforms highlighted by the Fund include privatisation, anti-corruption measures, state-owned enterprise restructuring, and climate resilience initiatives under the sustainability programme.
