Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement that will unlock about $1.2 billion in financing. The IMF has urged Islamabad to phase out fuel subsidy schemes, increase health and education spending, and implement timely tariff adjustments for the energy sector.
The IMF cautioned that significant risks remain, particularly due to geopolitical tensions, volatile energy prices, tighter global financial conditions, and trade disruptions. An IMF team, led by Iva Petrova, conducted discussions under the 2026 Article IV consultation, the fourth review of the Extended Fund Facility (EFF), and the third review of the Resilience and Sustainability Facility (RSF) in Karachi and Islamabad from September 23 to October 7, 2026.
Programme implementation under the EFF has remained broadly on track despite a challenging external environment. Authorities remain committed to preserving macroeconomic stability, strengthening public finances, ensuring inflation returns to the State Bank of Pakistan's target range, and accelerating reforms to foster private sector-led growth.
The authorities have also advanced their climate reform agenda under the RSF to reduce vulnerabilities to climate-related risks. At the conclusion of the discussions, Iva Petrova stated: "The IMF team has reached a staff-level agreement with Pakistani authorities on the fourth review of the 37-month Extended Arrangement under the EFF and the third review of the 28-month arrangement under the RSF."
This agreement is subject to approval by the IMF Executive Board. Upon approval, Pakistan will have access to about US$1.0 billion under the EFF and about US$210 million under the RSF, bringing total disbursements under the two arrangements to about US$5.7 billion.
Supported by the EFF, authorities have navigated the impact of the Middle East conflict, and strong policies have helped preserve macroeconomic stability. Real GDP growth reached 4 percent in the first three quarters of FY26, and while energy prices and supply disruptions weakened momentum, FY26 growth is estimated at 3.6 percent.
Headline inflation moderated to about 10.3 percent in September, while gross reserves rose to about US$21.5 billion by the end of September. The government remains focused on structural adjustments to ensure long-term fiscal health and economic resilience.
The IMF emphasized that continued adherence to the agreed-upon fiscal path is essential for maintaining investor confidence. The authorities have expressed their resolve to meet these targets through improved tax collection and expenditure rationalization.
Furthermore, the energy sector reforms are expected to reduce circular debt, which has been a persistent burden on the national exchequer. The government is working on a comprehensive plan to streamline energy distribution and generation costs.
As Pakistan moves forward, the focus remains on sustaining the current momentum of economic recovery while protecting the most vulnerable segments of society through targeted social safety nets.