Pakistan has cleared a key hurdle in its ongoing IMF program, reaching a staff-level agreement that paves the way for a $1.2 billion disbursement. Here’s a breakdown of what was agreed, what Pakistan still needs to do, and what it means for the economy going forward.
What Was Agreed
On October 7, 2026, the IMF and Pakistani authorities reached a staff-level agreement covering 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). The IMF also completed its 2026 Article IV consultation a routine annual health check of a country’s economy.
The agreement breaks down as follows:
- EFF tranche: About $1 billion
- RSF tranche: About $210 million
- Combined total: Roughly $1.2 billion
This is a staff-level agreement, meaning it still needs formal approval from the IMF’s Executive Board before any money is actually released. Once approved, Pakistan could receive the funds within four to five weeks. If approved, total disbursements under both IMF arrangements combined would reach approximately $5.7 billion.
How the Economy Is Performing, According to the IMF
- Growth: Real GDP growth came in at 4% for the first three quarters of FY26, though the full-year estimate has been revised down to 3.6%, due to higher energy prices and supply disruptions.
- Inflation: Headline inflation eased to about 10.3% in September, down from a peak in May, with core inflation staying contained.
- Current account: Broadly balanced for FY26, helped by strong remittances from overseas Pakistanis.
- Reserves: Gross reserves rose to about $21.5 billion by the end of September.
- Credit rating: Recent sovereign rating upgrades and renewed access to international capital markets suggest growing confidence in Pakistan’s economic policies.
The IMF noted that despite a difficult external environment, implementation of the program has “remained broadly on track.” At the same time, it flagged ongoing risks: geopolitical tensions, volatile energy prices, tighter global financial conditions, and trade disruptions.
What Pakistan Has Committed to Going Forward
Fiscal Policy
Pakistan has committed to implementing its FY27 budget around a primary surplus target of 2% of GDP, aimed at putting public debt on a downward path. This includes strengthening tax collection through risk-based audits, digital invoicing, and better use of third-party data, along with developing a broader medium-term tax reform strategy.
Fuel Subsidies
The current fuel support scheme is to be phased out promptly, given its high cost and broad reach. Any future fuel assistance is expected to be smaller, time-limited, and specifically targeted through existing social assistance programs rather than offered broadly.
Monetary Policy and Exchange Rate
The State Bank of Pakistan is expected to maintain an “appropriately tight” policy stance to bring inflation back within its target range, while continuing to allow exchange rate flexibility and gradually liberalizing the foreign exchange regime.
Energy Sector
Pakistan has committed to timely tariff adjustments and cost-reducing reforms aimed at preventing new circular debt from building up, while still protecting vulnerable consumers. This includes encouraging more private sector participation in electricity distribution and tackling unaccounted-for gas losses.
Social Protection
Health and education spending has already risen from 2.2% of GDP in FY24 to 2.5% in FY26, with a target of reaching 2.8% in FY27. Pakistan has also committed to expanding targeted cash transfer programs and improving how beneficiaries are identified and paid.
Governance and Structural Reforms
Broader commitments include strengthening competition in the economy, reducing regulatory and trade barriers, advancing privatization of state-owned enterprises, and strengthening anti-corruption institutions.
Officials’ Response
Finance Minister Muhammad Aurangzeb held a wrap-up session with IMF mission chief Iva Petrova at the conclusion of the review, according to Pakistan’s Ministry of Finance. The IMF said Pakistani authorities remain committed to macroeconomic stability and to durably bringing inflation back to the State Bank’s target range.
A Quick Recap of Pakistan’s Current IMF Program
- July 2024: Pakistan and the IMF agreed to a 39-month, $7 billion Extended Fund Facility program.
- March 2025: Staff-level agreement reached on the first review, alongside a separate $1.3 billion RSF arrangement.
- May 2025: Executive Board approved a $1 billion disbursement, bringing total releases to around $2.1 billion.
- October 2025: Staff-level agreement reached on the second review, securing $1 billion under the EFF and $200 million under the RSF, approved by the Board in December.
- May 2026: Board approved roughly $1.1 billion under the EFF and $220 million under the RSF, bringing cumulative disbursements to about $4.8 billion.
- October 2026: Fourth review staff-level agreement reached, covering this latest $1.2 billion.
Frequently Asked Questions
Has Pakistan already received the $1.2 billion?
Not yet. This is a staff-level agreement, which still requires approval from the IMF’s Executive Board before any funds are disbursed — typically within four to five weeks of that approval.
What is the difference between the EFF and the RSF?
The Extended Fund Facility (EFF) is Pakistan’s main $7 billion loan program focused on broader economic stability and reforms. The Resilience and Sustainability Facility (RSF) is a separate, smaller arrangement specifically focused on climate resilience and related reforms.
How much has Pakistan received from the IMF so far under this program?
Prior to this latest agreement, Pakistan had received roughly $4.8 billion. If this $1.2 billion is approved and disbursed, cumulative disbursements would reach about $5.7 billion.
What happens to fuel subsidies under this agreement?
Pakistan has committed to phasing out its current broad fuel support scheme, replacing it with smaller, time-bound, targeted assistance delivered through existing social protection programs.
With the staff-level agreement now in place, the next step is approval from the IMF’s Executive Board — a formality in most cases, but not guaranteed, and the real test will be whether Pakistan follows through on the fiscal, energy, and tax reforms it has committed to over the coming months.
