The IMF has reached a staff-level agreement with Pakistan for the first review of its 37-month Extended Fund Facility (EFF) and a new 28-month Resilience and Sustainability Facility (RSF), granting a total of $1.3 billion. The agreement, following discussions in February–March 2025 in Karachi and Islamabad, is subject to IMF Executive Board approval. If approved, Pakistan will receive $1 billion under the EFF, increasing total disbursements to $2 billion.
Macroeconomic Stability & Challenges:
Despite global challenges, Pakistan has made progress in stabilizing its economy over the past 18 months. Inflation has reached its lowest level since 2015, financial conditions have improved, and external balances have strengthened. However, economic growth remains moderate, with risks from policy slippages, geopolitical shocks, global financial tightening, and climate vulnerabilities.
Fiscal Discipline & Social Spending:
Pakistan has committed to fiscal consolidation, aiming to reduce public debt while safeguarding social spending. The government is on track to achieve a primary surplus of at least 1% of GDP in FY25 and plans to continue this in FY26. Social programs like the Benazir Income Support Program will be prioritized, while energy subsidies will be reduced to fund development projects.
Structural Fiscal Reforms:
Efforts to improve revenue collection, spending efficiency, and transparency are underway. All four provinces have reformed their Agriculture Income Tax systems to enhance tax equity, but effective implementation is key. Pakistan is also advancing digital public financial management systems and strengthening debt management frameworks.
Monetary Policy & Exchange Rate Management:
The State Bank of Pakistan will maintain tight monetary policy to keep inflation within the 5-7% target range. It will also support exchange rate flexibility and continue building foreign exchange reserves, which stood at $11.15 billion as of mid-March 2025.
Energy Sector Reforms:
Pakistan aims to implement cost-cutting measures to improve the energy sector’s viability and lower tariffs. Plans include enhancing distribution efficiency, integrating captive power into the grid, upgrading transmission systems, privatizing inefficient generation companies, and increasing renewable energy use.
Economic & Institutional Reforms:
The program will promote private sector growth by fully implementing the State-Owned Enterprise (SOE) governance framework and ensuring safeguards for the Pakistan Sovereign Wealth Fund. Additionally, measures to combat corruption and reduce trade barriers will create a fairer business environment.
Climate Resilience & Sustainability:
The RSF component will enhance climate resilience by strengthening disaster-resilient public investments, improving water resource management, coordinating disaster financing, and promoting green mobility. These efforts aim to mitigate climate risks while supporting sustainable development.
