ISLAMABAD: The International Monetary Fund (IMF) on Thursday reached a staff-level agreement (SLA) with the Pakistani authorities on the fourth review under the $7 billion Extended Fund Facility (EFF) and the third review under the $1.4bn Resilience and Sustainability Facility (RSF), qualifying Pakistan to draw about $1.2bn from the Fund’s resources within four to five weeks.
“The IMF team has reached an SLA 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 lending agency announced in an early morning statement.
The SLA is subject to approval by the IMF Executive Board. Upon approval, Pakistan will have access to about $1bn (SDR 760 million) under the EFF and about $210 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about $5.7bn, it said.
The two sides also concluded Article IV consultations, the IMF announced from Washington headquarters.
“Program implementation under the EFF has remained broadly on track despite a challenging external environment. The authorities remain committed to preserving macroeconomic stability, strengthening public finances, ensuring that inflation returns durably to the State Bank of Pakistan’s target range, enhancing energy sector viability, strengthening social protection, and accelerating reforms to foster sustainable, private sector-led, and inclusive growth,” the IMF statement said.
The authorities have also continued to advance their climate reform agenda under the RSF to strengthen Pakistan’s resilience and reduce vulnerabilities to climate-related risks, it added.
The fund team led by Iva Petrova was in Pakistan and held discussions under the 2026 Article IV consultation and on the 4th review EFF and the 3rd review under the RSF from September 23 to October 7.
“Supported by the EFF, the authorities have successfully navigated the impact of the Middle East conflict, and strong policies have helped preserve macroeconomic stability. Real GDP growth reached 4 per cent in the first three quarters of FY26, and although higher energy prices and supply disruptions weakened somewhat the momentum, FY26 growth is estimated at 3.6pc.”
Headline inflation moderated to about 10.3pc in September after peaking in May, while core inflation remained contained, the fund said.
It added: “The current account was broadly balanced in FY26 supported by strong remittances, and gross reserves rose to about $21.5bn by end-September. Sovereign rating upgrades and renewed international market access also point to stronger policy credibility. Nevertheless, the fund said risks remain high, particularly from geopolitical tensions, volatile energy prices, tighter global financial conditions, and trade disruptions.”
The authorities remain committed to sound macroeconomic policies, which are critical to safeguarding stability amidst the ongoing shock-prone environment, it further stated.
The authorities’ policy priorities would continue to maintain strong fiscal policies. Steadfast implementation of the FY27 budget, anchored by an underlying primary surplus of 2pc of GDP and supported by tax policy and revenue administration measures, is critical to placing public debt on a durable downward path, it noted.
Revenue administration reforms, including improved risk-based audits, digital invoicing, and use of third-party data, will help safeguard the revenue targets. A comprehensive medium-term tax reform strategy should make the system fairer, simpler, and more growth-friendly, while protecting revenues and reducing distortions, the statement said.
The authorities will stay the course in enhancing public financial management, it said, noting that they were “making progress in strengthening public financial management to improve the efficiency and transparency of the budget process, public investment, procurement, and government cash management.
“They remain committed to reducing debt rollover risks and servicing costs amid elevated gross financing needs, while advancing the development of the domestic government securities market and diversifying the investor base,” the IMF said.
On social protections, the IMF said authorities had arrested the long-term decline in health and education spending, raising it from 2.2pc of GDP in FY24 to 2.5pc of GDP in FY26.
It noted that the authorities were “committed to increasing it further to 2.8pc of GDP in FY27, closely monitoring implementation, and reallocating resources as needed to meet this objective.
“The planned increase in targeted cash-transfer benefits, together with continued improvements in beneficiary coverage and payment systems, will strengthen protection for vulnerable households and support more inclusive growth.”
The fund called for phasing out the fuel support scheme promptly, given its high cost and broad targeting. Any future fuel support—should oil prices surprise on the upside—should be limited, time-bound, targeted using established social assistance programs, and accommodated within the FY27 budget envelope, it said.
It called on the State Bank of Pakistan (SBP) to maintain an “appropriately tight” policy stance to ensure inflation returns durably to the SBP’s target range.
“Exchange rate flexibility should continue to serve as an important shock absorber, while further reserve accumulation, gradual liberalisation of the foreign exchange regime, and deeper domestic financial markets will strengthen resilience and support private sector development,” it directed.
The fund also called for timely tariff adjustments and cost-reducing reforms essential to prevent renewed circular debt accumulation while protecting vulnerable consumers.
“Priorities include improving sector efficiency, advancing private participation in distribution, deepening electricity market competition, maintaining gas sector cost recovery, and reducing unaccounted-for gas losses”, it said.
The fund said that Article IV consultation focused on reforms to support the structural transformation of the economy to higher value-added activities and reduce gaps relative to peer countries in key areas, including by strengthening competition, reducing regulatory and trade barriers, advancing privatisation, enhancing SOE governance and transparency, and strengthening governance and anti-corruption institutions.
Together with efforts to introduce a simpler and fairer tax system, allocate greater public resources toward human and capital development, ensure a more cost-efficient energy sector, and deepen financial markets, these reforms are critical to raise productivity, increase labour force participation and job creation, and support private investment and exports, it noted.
“Supported by the RSF, the authorities are continuing efforts to strengthen resilience to climate change, with recent progress in mainstreaming climate considerations into public investment planning and strengthening disaster risk financing and coordination.
“Further reforms are advancing on irrigation water pricing and collection, better-targeted electricity subsidies, energy-efficiency standards, and transport decarbonization.”
Later in the day, the Ministry of Finance, in a post on social media platform X, said that Finance Minister Muhammad Aurangzeb held a “wrap-up session” with Petrova at the conclusion of the review.
EFF and RSF packages
Pakistan and the IMF had reached the 39-month $7bn aid package deal in July 2024, with the programme set to allow the country to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”.
In March 2025, the two sides reached an SLA on the first biannual review of the EFF programme and on unlocking the $1.3bn RSF arrangement.
Subsequently, in May that year, the IMF’s Executive Board allowed a $1bn disbursement under the EFF — bringing total released funds under the package to about $2.1bn — and also approved the RSF loan.
In October 2025, the government and the Fund reached an SLA on the second review of the EFF, securing another $1bn under the programme and $200 million under the RSF after the Board’s approval in December.
A Petrova-led mission held talks with Pakistan in March this year for the third review of the EFF and the second review of the RSF, but the two sides failed to reach an agreement and decided to continue negotiations.
Then in May, the IMF’s Executive Board allowed Pakistan to draw about $1.1bn under the EFF and about $220m under the RSF, bringing total disbursements under the two arrangements to roughly $4.8bn.
An IMF mission, also led by Petrova, last visited Pakistan from May 13 to May 20, with the visit focusing on “recent economic developments, reform implementation, and the budget strategy for fiscal year 2027”.
