Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement that will unlock around $1.2 billion in fresh financing, marking another major step toward stabilizing the economy and advancing long-term reform goals.
According to a statement issued by the IMF on Wednesday, the agreement—pending approval from the Fund’s Executive Board—comprises $1 billion under the Extended Fund Facility (EFF) and $200 million under the Resilience and Sustainability Facility (RSF). Once approved, total disbursements to Pakistan under both programmes will rise to about $3.3 billion.
The announcement follows detailed discussions between the IMF mission led by Iva Petrova and Pakistani officials during the second review of the EFF and the first review of the RSF. Talks were concluded last week in Islamabad and later in Washington, where Finance Minister Muhammad Aurangzeb expressed optimism about finalizing the deal within days.
In its statement, the IMF noted that Pakistan’s reform efforts were “entrenching macroeconomic stability and rebuilding market confidence.” It highlighted improved fiscal performance, a surplus in the current account for the first time in 14 years, declining inflation, and narrowing sovereign bond spreads as signs of a steady recovery.
However, the Fund cautioned that recent floods have weighed on agricultural output and are likely to slow projected GDP growth for FY26 to between 3.25 and 3.5 percent. “The floods underscore Pakistan’s high vulnerability to natural disasters and substantial climate-related risks,” Petrova said, adding that resilience-building measures remain essential to sustain progress.
The IMF acknowledged Pakistan’s commitment to prudent fiscal management, noting that authorities aim to maintain a primary budget surplus of 1.6 percent of GDP through continued revenue mobilization and efficient expenditure control. The Fund also underscored that the government was “prepared to take additional measures” if revenues fall short of targets.
The statement further mentioned that the Benazir Income Support Programme (BISP) will remain a key pillar of social protection policy. The government has committed to expanding the programme’s coverage while also scaling up health and education spending to cushion vulnerable households and promote inclusive growth.
In the monetary sphere, the State Bank of Pakistan (SBP) will continue pursuing a data-driven approach to monetary policy, aiming to keep inflation within the target range of five to seven percent. The Fund said that while recent floods may cause temporary price spikes, the SBP is ready to adjust its stance to maintain price stability.
On the energy front, the IMF praised Pakistan’s commitment to prevent circular debt accumulation through timely tariff adjustments and structural reforms. It urged continued progress in power distribution company privatization, upgrading transmission infrastructure, and transitioning toward a competitive electricity market.
The Fund also emphasized the need for state-owned enterprise reforms, simplification of the tax system, and reduced government intervention in commodity markets to encourage private sector-led growth. It noted ongoing collaboration with provinces to enhance domestic revenue mobilization and improve fiscal transparency.
Meanwhile, Pakistan’s climate-focused RSF programme will support initiatives related to green mobility, water management, and disaster risk financing, aligning with the country’s Vision 2035 and climate resilience agenda.
Officials at the Finance Ministry described the agreement as a vote of confidence in Pakistan’s economic direction. “This reflects strong international support for our reform trajectory and fiscal discipline,” a senior finance official said, adding that the government will continue efforts to ensure sustainable growth and social welfare.
The final approval of the deal is expected by the IMF Executive Board later this month, after which funds will be released to Pakistan. The new pricing cycle will bring total IMF support under the current extended arrangement to more than $3 billion since the programme’s renewal in 2024.
