ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement (SLA) on the fourth review of the $7 billion Extended Fund Facility (EFF) and the third review of the $1.4 billion Resilience and Sustainability Facility (RSF), paving the way for Pakistan to receive around $1.2 billion from the Fund.
The agreement, reached on Thursday following talks between the two sides, remains subject to approval by the IMF Executive Board. Once approved, Pakistan will receive approximately $1 billion under the EFF and $210 million under the RSF, taking total disbursements under the two programmes to around $5.7 billion.
The IMF also completed its Article IV consultation with Pakistan.
“The IMF team has reached a staff-level agreement with the Pakistani authorities on the fourth review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and the third review of the 28-month arrangement under the Resilience and Sustainability Facility (RSF),” the Fund said in a statement.
The IMF mission, led by Iva Petrova, held discussions with Pakistani authorities from September 23 to October 7 on the 2026 Article IV consultation, the fourth EFF review and the third RSF review.
According to the IMF, implementation of the EFF programme has remained broadly on track despite a challenging external environment. The authorities remain committed to maintaining macroeconomic stability, strengthening public finances, improving the viability of the energy sector, expanding social protection and accelerating structural reforms to support sustainable, private sector-led and inclusive growth.
The IMF said Pakistan had successfully navigated the impact of the Middle East conflict, with strong policies helping preserve macroeconomic stability. Real GDP growth reached 4% during the first three quarters of FY26, while full-year growth is estimated at 3.6%.
Headline inflation eased to around 10.3% in September after peaking in May, while core inflation remained contained. The current account was broadly balanced during FY26, supported by strong remittances, while gross foreign exchange reserves increased to approximately $21.5 billion by the end of September.
However, the Fund cautioned that risks remain elevated due to geopolitical tensions, volatile energy prices, tighter global financial conditions and trade disruptions.
Fiscal and Tax Reforms
The IMF stressed the importance of maintaining strong fiscal policies and implementing the FY27 budget, which is anchored by an underlying primary surplus target of 2% of GDP.
It said revenue administration reforms, including risk-based audits, digital invoicing and the use of third-party data, would be important to protect revenue targets. The Fund also called for a comprehensive medium-term tax reform strategy to make the tax system simpler, fairer and more conducive to economic growth.
Pakistan is also expected to continue reforms in public financial management, government procurement, public investment and cash management, while reducing debt rollover risks and financing costs.
Social Protection
The IMF noted that Pakistan had reversed the long-term decline in spending on health and education, with combined expenditure increasing from 2.2% of GDP in FY24 to 2.5% in FY26.
The authorities have committed to increasing this allocation to 2.8% of GDP in FY27, while improving targeted cash transfers, beneficiary coverage and payment systems to strengthen support for vulnerable households.
The Fund also called for the prompt phasing out of the fuel support scheme, citing its high cost and broad targeting. Any future fuel assistance should be limited, time-bound and targeted through established social protection programmes.
Energy Sector Reforms
The IMF called for timely tariff adjustments and cost-reducing reforms to prevent a renewed build-up of circular debt while protecting vulnerable consumers.
Key priorities include improving the efficiency of the power sector, increasing private-sector participation in electricity distribution, promoting competition in electricity markets, maintaining cost recovery in the gas sector and reducing unaccounted-for gas losses.
The Fund also urged the State Bank of Pakistan to maintain an “appropriately tight” monetary policy stance to ensure inflation returns sustainably to its target range.
It said exchange-rate flexibility should continue to act as a shock absorber, while further reserve accumulation, gradual liberalisation of the foreign exchange regime and deeper domestic financial markets would strengthen economic resilience.
Structural and Climate Reforms
The Article IV consultation focused on structural reforms aimed at shifting the economy towards higher-value-added activities and closing productivity gaps with peer countries.
The IMF highlighted the need to strengthen competition, reduce regulatory and trade barriers, advance privatisation, improve state-owned enterprise governance and transparency, and strengthen governance and anti-corruption institutions.
Under the RSF, Pakistan is continuing reforms aimed at improving resilience to climate change. Recent progress includes integrating climate considerations into public investment planning and strengthening disaster-risk financing and coordination.
Further reforms are being pursued in irrigation water pricing and collection, electricity subsidy targeting, energy-efficiency standards and transport decarbonisation.
$7bn EFF and $1.4bn RSF Programmes
Pakistan and the IMF agreed on the 39-month, $7 billion EFF programme in July 2024, aimed at consolidating macroeconomic stability and creating conditions for stronger, more inclusive and resilient growth.
In March 2025, the two sides reached an SLA on the first review of the EFF and agreed on the $1.3 billion RSF arrangement. The IMF Executive Board subsequently approved around $1 billion under the EFF and the RSF programme.
In October 2025, Pakistan and the Fund reached an SLA on the second EFF review, securing another $1 billion under the programme and around $200 million under the RSF following Board approval in December.
A Petrova-led mission held talks with Pakistan in March 2026 for the third EFF review and second RSF review, but the two sides did not reach an agreement at that stage and continued negotiations.
In May, the IMF Executive Board approved approximately $1.1 billion under the EFF and $220 million under the RSF, taking total disbursements under the two programmes to around $4.8 billion.
The latest agreement, once approved by the IMF Executive Board, will raise total disbursements under the EFF and RSF arrangements to approximately $5.7 billion.
Story by Khaleeq Kiani
