Islamabad, October 8:
The International Monetary Fund (IMF) has reached a preliminary agreement with Pakistan that could unlock approximately $1.2 billion in fresh funding, offering additional financial support to the country as it grapples with rising energy costs, inflationary pressures and economic uncertainties.
The staff-level agreement covers the fourth review of Pakistanās 37-month Extended Fund Facility (EFF) and the third review of its 28-month Resilience and Sustainability Facility (RSF). Under the arrangement, Pakistan could receive $1 billion through the IMFās main loan programme and another $210 million under the climate resilience-focused facility. The agreement remains subject to approval by the IMF Executive Board. If approved, total disbursements under the two programmes would rise to approximately $5.7 billion. The negotiations were led by an IMF team headed by Iva Petrova, which held discussions with Pakistani authorities from September 23 to October 7.
The IMF said Pakistan had made progress in restoring macroeconomic stability, with real gross domestic product growth reaching 4 per cent during the first three quarters of fiscal year 2025ā26. However, higher energy prices and supply disruptions linked to the conflict in West Asia have weakened the growth outlook, with full-year growth estimated at 3.6 per cent. Headline inflation moderated to around 10.3 per cent in September, while foreign exchange reserves rose to approximately $21 billion by the end of the month. Strong remittances helped keep the current account broadly balanced during the previous fiscal year.
Despite these improvements, the IMF has warned that Pakistan continues to face substantial economic risks. It has urged the government to phase out costly fuel subsidies, maintain fiscal discipline, implement tax reforms and ensure timely electricity tariff adjustments. The Fund has also stressed the need to prevent further accumulation of debt in the power sector and improve the governance of state-owned enterprises. Any future fuel assistance, it said, should be targeted, time-bound and accommodated within the governmentās budget.
The additional funding is expected to support Pakistanās economic reform programme and strengthen its ability to manage external shocks. However, the conditions attached to IMF assistance could require difficult policy decisions, particularly concerning fuel prices, taxation and electricity costs. The challenge for Islamabad will be to maintain financial stability while limiting the impact of economic reforms on households and businesses already facing elevated living expenses.