IMF and Pakistan Reach Staff-Level Agreement on $1.2 Billion Loan

The International Monetary Fund (IMF) and the Government of Pakistan have reached a staff-level agreement on the second review of the country’s 37-month Extended Fund Facility (EFF) and the first review of the 28-month Resilience and Sustainability Facility (RSF), the IMF announced on October 14, 2025. The agreement, which follows discussions held in Karachi, Islamabad, and Washington DC, is subject to approval by the IMF Executive Board. Once approved, Pakistan will gain access to approximately US$1.0 billion under the EFF and US$200 million under the RSF, bringing total disbursements under both arrangements to about US$3.3 billion. The IMF noted that implementation of the EFF-supported program remains strong, with the government committed to fiscal discipline, supporting flood victims, keeping inflation within the State Bank of Pakistan’s (SBP) target range, restoring energy sector viability, and advancing structural reforms. The authorities’ climate reform agenda, backed by the RSF, is also progressing, with recent floods highlighting the urgent need for comprehensive reforms to enhance resilience against climate-related risks. Pakistan’s economic recovery is on track, with the current account recording a surplus for the first time in 14 years, the fiscal primary balance exceeding targets, inflation contained, and external buffers strengthening. However, the recent floods, which have affected nearly 7 million people and caused significant damage, have weighed on the outlook, particularly for the agriculture sector, and are expected to bring down projected GDP growth for FY26 to around 3.25-3.5 percent. The government reaffirmed its commitment to the EFF and RSF programs, focusing on fiscal consolidation, poverty reduction, and social protection. Key priorities include meeting the FY26 budget primary surplus target, enhancing the Benazir Income Support Program (BISP), scaling up health and education spending, and advancing fiscal and structural reforms. The SBP remains committed to a prudent, data-driven monetary policy to keep inflation within the 5-7 percent target range. Efforts to restore the energy sector’s viability continue, with a focus on timely tariff adjustments, privatization of inefficient companies, and upgrading the transmission system. The government is also pushing forward with reforms to boost productivity, improve governance, and foster a more competitive business environment, including in the agricultural and trade sectors. On the climate front, the authorities are implementing reforms to promote green mobility, improve water system resilience, and establish frameworks for disaster risk financing, in line with national mitigation commitments. The IMF expressed sympathy for those affected by the recent floods and thanked Pakistani authorities and partners for their cooperation during the review process.