Pakistan and the International Monetary Fund have reached a staff-level agreement on the fourth review of the Extended Fund Facility (EFF) and the third review of the Resilience and Sustainability Facility (RSF). Once approved by the IMF Executive Board, the deal will release about $1.2 billion, roughly $1.0bn under the EFF and $210 million under the RSF, taking total disbursements under the two arrangements to about $5.7bn, ProPakistani reported on October 8.
The mission, led by Iva Petrova, held talks in Karachi and Islamabad from September 23 to October 7. As of this writing, no date has been announced for the Board meeting.
Where the economy stands
- Growth: real GDP growth for FY26 is estimated at 3.6%. It ran at 4% in the first three quarters before higher energy prices and supply disruptions slowed it.
- Inflation: headline inflation eased to about 10.3% in September after peaking in May.
- External account: the current account was broadly balanced in FY26, helped by strong remittances.
- Reserves: gross reserves were about $21.5bn at end-September.
The IMF credited sound policies for maintaining stability through the Middle East conflict. It also warned that risks remain high from geopolitical tensions, volatile energy prices and tighter global financing.
The conditions
Budget and taxes
The government is expected to stick to the FY27 budget built around a primary surplus of 2.0% of GDP. Revenue administration reforms include risk-based audits, digital invoicing and the use of third-party data, alongside a medium-term tax reform strategy.
Fuel support
The IMF wants the fuel support scheme phased out promptly. Any future relief should be limited, time-bound and targeted through existing social assistance programmes rather than blanket price cuts. See our explainer on fuel prices.
Energy and the State Bank
Timely tariff adjustments and cost-cutting reforms are meant to stop circular debt rebuilding. The Fund also recommends keeping monetary policy tight until inflation durably returns to target, continued exchange-rate flexibility and higher reserves.
Social spending and climate
Health and education spending rose from 2.2% of GDP in FY24 to 2.5% in FY26, and the government has committed to 2.8% in FY27. Under the RSF, reforms cover irrigation water pricing, better-targeted electricity subsidies, energy-efficiency standards and cleaner transport.
What it means for markets
Investors welcomed the agreement: the KSE-100 rose 2,593 points to close at 168,460 on October 6 as the deal neared, Gulf News reported. More in our Markets section.
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