Islamabad: The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan for the release of approximately USD 1.2 billion under two loan tranches, officials said, while cautioning that ongoing geopolitical tensions in the Middle East could affect economic stability.
The agreement, pending approval by the IMF Executive Board, includes USD 1 billion under the Extended Fund Facility (EFF) and USD 210 million under the Resilience and Sustainability Facility (RSF), bringing total disbursements under the programs to about USD 4.5 billion.
IMF Mission Chief Iva Petrova said the Fund’s assessment differs from Pakistan’s Finance Ministry projections, which foresee only minor effects from the regional conflict, including a 0.3% rise in inflation, 4% economic growth, and a current account deficit within USD 2 billion. “The conflict casts a cloud over the outlook,” she added, noting that volatile energy prices and tighter global financial conditions could push inflation higher and weigh on growth and the current account.
The IMF emphasized that Pakistan must maintain strict fiscal targets, including a primary budget surplus of 1.6% of GDP for FY26 and 2% for FY27. Authorities are expected to broaden the tax base, control expenditures, and improve fiscal burden sharing. Fuel subsidies, totaling PKR 125 billion by April 3, are included in the framework.
The Fund also called on the State Bank of Pakistan to keep inflation within 7.5% and allow interest rates to rise if price pressures intensify, while maintaining exchange rate flexibility to manage external shocks.
Energy sector reforms, structural changes in state-owned enterprises, and privatization remain priorities. Revenue mobilisation through the Federal Board of Revenue (FBR) is progressing, including audits, digital invoicing, and governance improvements, though internal weaknesses could limit effectiveness.
Authorities are expanding social protection measures, including inflation-adjusted Benazir Income Support Programme (BISP) cash transfers. Petrova said the government remains committed to macro-financial stability, structural reforms, and protecting vulnerable populations amid global uncertainties.
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