IMF, Pakistan reach Staff-Level Agreement for $1.2bn disbursement

October 15, 2025 (MLN): The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan on the second review of its Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF).

This agreement paves the way for a disbursement of approximately $1.2 billion, subject to approval by the IMF Executive Board.

The agreement follows discussions held from September 24 to October 8, 2025, in Karachi, Islamabad, and Washington D.C., led by IMF Mission Chief Iva Petrova.

Once approved, Pakistan will gain access to about $1.0 billion under the EFF and $200 million under the RSF, bringing total disbursements under both programs to around $3.3 billion.

Economic program on track despite flood challenges

According to the IMF, Pakistan’s EFF-supported program is entrenching macroeconomic stability and rebuilding market confidence.

The lender noted progress on fiscal consolidation, with the FY25 current account posting a surplus, the first in 14 years, a fiscal primary balance exceeding targets, and contained inflation alongside improving external buffers.

However, the recent floods, which have affected nearly 7 million people and caused over 1,000 deaths, have weighed on the country’s outlook, particularly in the agriculture sector, reducing projected FY26 GDP growth to 3.25–3.5%.

The IMF emphasized the importance of building climate resilience amid Pakistan’s vulnerability to natural disasters.

The Pakistani authorities reaffirmed their commitment to the EFF and RSF programs, focusing on prudent macroeconomic policies and structural reforms. Key policy priorities include:

• Fiscal consolidation: Maintaining a FY26 primary surplus of 1.6% of GDP, supported by improved revenue mobilization and tax compliance.

• Social protection: Expanding the Benazir Income Support Program (BISP) and scaling up health and education spending to safeguard vulnerable groups.

• Monetary policy: The State Bank of Pakistan (SBP) remains committed to ensuring inflation stays within the 5–7% target range, adjusting its stance as needed amid post-flood price pressures.

• Energy sector reforms: Preventing the buildup of circular debt through timely tariff adjustments and continuing privatization and performance reforms in distribution and generation companies.

• Structural reforms: Strengthening tax policy, public financial management, and reducing state involvement in commodity markets to promote competitiveness in agriculture and trade.

The IMF acknowledged progress on Pakistan’s climate reform agenda, supported by the RSF, which includes green mobility initiatives, water system resilience, and frameworks for disaster risk financing.

The Fund emphasized that recent floods reinforce the urgency of sustained climate adaptation policies.

“The IMF team wants to express its sympathy to those affected by the recent floods and is grateful to the Pakistani authorities, private sector, and development partners for many fruitful discussions and their hospitality throughout this mission,” said Iva Petrova, IMF Mission Chief for Pakistan.

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