EDITORIAL: Reports suggest that the ongoing third mandatory review for the ongoing USD 7 billion International Monetary Fund’s (IMF’s) Extended Fund Facility (EFF) programme has been delayed due to the Middle East conflict, given that all previous global- and country-specific macroeconomic projections by the Fund require a revisit though the precise recalibration of data would be determined “by the extent and duration of the conflict.”
The Fund in its 3 March press release, three days after the conflict began, further stated that “so far we have observed disruptions to trade and economic activity, surges in energy prices, and volatility in financial markets” — an observation that has been noted globally as well as in Pakistan with exporters clamouring for government support to ensure that their consignments reach their destination.
This view is supported by the following statement issued by the IMF team led by Petrova on 11 March after the virtual discussions were held with the authorities from February 25 to March 11: “While considerable progress was made in the discussions, these will continue in the coming days, including to more fully assess the impact of recent global developments on Pakistan’s economy and the EFF-supported programme.” Be that as it may, the press release ended on the note that “the IMF team and the authorities will continue these discussions with a view to conclude them in the coming days” — an unambiguous reference to the statement made earlier in the text.
The press release identified progress in EFF implementation, specifically, with respect to “sustaining the fiscal consolidation to strengthen public finances; maintaining a sufficiently tight monetary policy to ensure inflation remains durably within the State Bank of Pakistan’s target range; and advancing reforms to improve the viability of the energy sector,” adding that “particular attention was paid to deepening structural reforms, given the authorities’ emphasis on accelerating growth, alongside efforts to strengthen social protection and rebuild health and education spending. These discussions are ongoing.”
This may indicate further discussions on the third review are in order as ‘accelerating growth’ requires loosening the monetary policy through reducing the policy rate (which was kept stable as per the decision of the Monetary Policy Committee on 9 March, perhaps reflective of an agreement with the Fund), strict adherence to the principle of full-cost recovery by utilities (with no incentive package extended to any specific group) and keeping the fiscal policy tight (with the Prime Minister’s incentive package perhaps coming under discussion that envisaged a 4.04 rupee per unit reduction in electricity rates and reducing export refinance rates from 7.5 percent to 4.5 percent).
There is, however, some concern in Pakistan that the failure to reach a staff-level agreement that would delay disbursement of the next tranche release may trigger serious balance of payments issues, the reason behind the country seeking an IMF package, given that even prior to the onset of the conflict: (i) Pakistan’s trade deficit had widened during the first eight months of the current year – from USD 20.04 billion July-February 2025 to USD 25.04 billion in the same period this year; (ii) while remittances were on an upward trajectory till last month yet the cessation of economic activity in the Gulf countries is expected to reduce inflows till the end of the conflict; and (iii) the unlikelihood of pledged (Memoranda of Understanding) foreign direct investment entering the country from the Gulf countries at this time.
In the event that the Fund team expressed reservations at the failure to implement some of the agreed time-bound conditions and structural benchmarks then it would be advisable for the government to remove these concerns forthwith to ensure that the delay is not sourced to lack of timely action on our part.
Copyright Business Recorder, 2026
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