IMF, Pakistan reach staff-level agreement on EFF, RSF reviews

The International Monetary Fund (IMF) staff and Pakistan have reached a staff-level agreement on the fourth review of the $7-billion Extended Fund Facility (EFF) and the third review of the Resilience and Sustainability Facility (RSF), while completing the 2026 Article IV consultation.

IMF team, led by Iva Petrova, held discussions under the 2026 Article IV consultation and on the fourth review under the Extended Fund Facility (EFF) and the third review under the Resilience and Sustainability Facility (RSF) in Karachi and Islamabad from September 23 to October 7, 2026. At the conclusion of the discussions, Petrova issued the following statement on Thursday:

“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 staff-level agreement is subject to approval by the IMF Executive Board. Upon approval, Pakistan will have access to about $1.0 billion (SDR 760 million) under the EFF and about US$210 million (SDR 154 million) under the RSF, bringing total disbursements under the two arrangements to about $5.7 billion.

“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 percent in the first three quarters of FY26, and although higher energy prices and supply disruptions weakened somewhat the momentum, FY26 growth is estimated at 3.6 percent. Headline inflation, after peaking in May, moderated to about 10.3 percent in September, while core inflation remained contained. The current account was broadly balanced in FY26 supported by strong remittances, and gross reserves rose to about $21½ billion by end-September. Sovereign rating upgrades and renewed international market access also point to stronger policy credibility. Nevertheless, 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.

The authorities’ policy priorities include:

• Maintaining strong fiscal policies. Steadfast implementation of the FY27 budget, anchored by an underlying primary surplus of 2.0 percent of GDP and supported by tax policy and revenue administration measures, is critical to placing public debt on a durable downward path. 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 reducingdistortions.
• Enhancing public financial management. The authorities are 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.
• Prioritizing social spending. The authorities have arrested the long-term decline in health and education spending, raising it from 2.2 percent of GDP in FY24 to 2.5 percent of GDP in FY26. They are committed to increasing it further to 2.8 percent 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. However, the fuel support scheme should be phased out promptly, given its high cost and broad targeting. Any future fuel support—should oil prices surprise on the upside—should be limited, timebound, targeted using established social assistance programs, and accommodated within the FY27 budget envelope.
• Maintaining an appropriate monetary stance and exchange rate flexibility. The State Bank of Pakistan (SBP) should continue maintaining 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 liberalization of the foreign exchange regime, and deeper domestic financial markets will strengthen resilience and support private sector development.
• Advancing energy sector viability. Timely tariff adjustments and cost-reducing reforms remain 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.

“The 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 privatization, 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 labor force participation and job creation, and support private investment and exports.

“ 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.

“The IMF team is grateful to the Pakistani authorities, private sector, and development partners for their hospitality during the visit to Islamabad and Karachi, and for fruitful discussions,” the IMF statement concluded.

Govt, IMF wraps up

At the conclusion of Fourth Review of EFF) and Third review of RSF, IMF Mission Chief Iva Petrova held a wrap up session with the Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, at the Q Block Pak Secretariat Islamabad, read an official statement.

Secretary Finance Imdad Ulalh Bosal and IMF Resident Representative Mahir Binici were also present.