IMF clears $1.2 billion support for Pakistan

Washington: The International Monetary Fund has reached a staff-level agreement with Pakistan that could unlock about $1.2 billion in fresh funding, as the country pushes ahead with fiscal tightening, structural reforms, and measures to stabilise inflation and growth.

The agreement follows discussions between an IMF team and Pakistani authorities on the third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).

“The IMF team has reached a staff-level agreement with the Pakistani authorities,” the Fund said in a statement, adding that the deal remains subject to approval by its Executive Board.

Once approved, Pakistan will gain access to about $1.0 billion under the EFF and around $210 million under the RSF, taking total disbursements under the programmes to roughly $4.5 billion.

The IMF said Pakistan’s programme implementation “remained broadly aligned” with its goals of strengthening public finances, containing inflation, and advancing structural reforms.

Economic activity has shown signs of recovery. “Following the recovery in FY25, economic activity gained further momentum,” the statement said, noting that inflation and the current account balance remained contained while external buffers improved.

However, risks persist. The IMF warned that the conflict in the Middle East could pressure Pakistan’s outlook through volatile energy prices and tighter global financial conditions.

The authorities have committed to maintaining a “prudent fiscal stance” to reduce public debt, targeting a primary surplus of 1.6 per cent of GDP in FY26 and 2 percent in FY27.

Revenue mobilisation remains a key priority. The Federal Board of Revenue is implementing reforms, including stronger taxpayer audits and expanded digital monitoring systems, while a new Tax Policy Office is preparing a medium-term reform strategy.

On monetary policy, the State Bank of Pakistan is expected to remain vigilant. The IMF said it “stands ready to raise interest rates” if inflationary pressures intensify, while exchange rate flexibility should act as a shock absorber.

Energy sector reforms remain central to the programme. The authorities are working to prevent a recurrence of circular debt, ensure cost recovery through tariff adjustments, and push ahead with privatisation and efficiency improvements.

IANS