Pakistan, IMF Reach Staff-Level Agreement on $1.2 Billion Loan
ISLAMABAD, PAKISTAN — WEB DESK: Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement covering approximately $1.2 billion in financing, following negotiations over economic reforms, fiscal stability and government spending commitments.
The agreement, announced on Thursday, October 8, follows the fourth review of Pakistan’s 37-month Extended Fund Facility (EFF) and the third review of its 28-month Resilience and Sustainability Facility (RSF).
Once approved by the IMF Executive Board, Pakistan will gain access to approximately $1 billion under the EFF and $210 million under the RSF, bringing total disbursements under the two arrangements to around $5.7 billion.
The agreement follows discussions held in Karachi and Islamabad between September 23 and October 7, led by IMF mission chief Iva Petrova.
A major condition involves the government’s fuel subsidy programme. Pakistan has agreed to promptly phase out the existing scheme because of its high fiscal cost and broad coverage.
Prime Minister Shehbaz Sharif had previously introduced a three-month fuel relief package worth Rs75 billion, offering Rs100 per litre in support for limited monthly fuel consumption by eligible motorcycle and small-car owners.
Future fuel assistance would need to be targeted, temporary and accommodated within the government’s budget.
The agreement also includes commitments to increase spending on healthcare and education to 2.8% of gross domestic product in fiscal year 2026-27, alongside improvements in targeted cash transfers for vulnerable households.
Pakistan has reaffirmed its commitment to achieving a primary budget surplus of 2% of GDP during the current fiscal year through tax administration reforms and expenditure management.
The IMF has also emphasised stronger governance of state-owned enterprises, electricity sector reforms, timely tariff adjustments and measures to prevent further accumulation of circular debt.
Pakistan’s economy has shown signs of stabilisation despite regional tensions and higher energy prices.
Economic growth for fiscal year 2025-26 is estimated at 3.6%, while headline inflation moderated to approximately 10.3% in September.
Foreign exchange reserves exceeded $21 billion by the end of September, supported by remittances and a broadly balanced current account.
However, geopolitical tensions, volatile energy prices and global financial uncertainty continue to pose risks to the economic outlook.
The staff-level agreement represents progress in Pakistan’s ongoing IMF programme, although the financing will become available only after formal approval by the Fund’s Executive Board.
