Pakistan and the International Monetary Fund (IMF) on Tuesday reached a Staff Level Agreement (SLA) for the second review of the ongoing 37-month Extended Fund Facility (EFF) and the first review of the new 28-month Resilience and Sustainability Facility (RSF).
Subject to approval of the IMF executive board, the IMF would provide Islamabad $1 billion under the EFF and $200 million under the RSF, bringing total disbursements thus far under the two arrangements to around $3.3 billion.
The SLA signing follows the completion of the IMF team’s visit to Islamabad on Oct. 8. In a statement, the global lender said the EFF is supporting the entrenchment of macroeconomic stability in Pakistan and rebuilding market confidence. “The recovery remains on track, with the FY25 current account recording a surplus—the first in 14 years,” it added.
The statement did not mention any conditions, such as the completion of prior actions, as witnessed in the past for securing board approval. It noted Pakistan was continuing the implementation of the EFF-supported program. “The authorities are committed to sustaining the fiscal effort to strengthen public finances while providing needed support to the victims of the recent floods; ensuring inflation remains durably within the SBP’s target range; restoring the viability of the energy sector; and advancing structural reforms,” it said.
The lender noted the primary balance had surpassed the program target, inflation was contained, external buffers were strengthening amid improving financial conditions and narrowing sovereign spreads. However, it said, the devastation caused by this year’s floods had weighed on the economic outlook, particularly in the agriculture sector. The damage, it said, had lowered the FY26 GDP projection to between 3.25 and 3.5%.
The IMF emphasized that the disaster underscored Pakistan’s high vulnerability to climate-related shocks and the pressing need to strengthen climate resilience. It said Pakistani authorities had reaffirmed their commitment to maintaining prudent macroeconomic policies and advancing structural reforms under both programs.
Key policy priorities include continuing fiscal consolidation, strengthening poverty reduction measures, improving revenue mobilization, maintaining a tight and data-driven monetary policy, restoring the energy sector’s financial health, and advancing climate resilience initiatives. It said the government was committed to achieving a FY26 primary budget surplus of 1.6% of GDP through sustained tax policy and compliance efforts. It is also providing emergency flood relief through reallocations within federal and provincial budgets, it added.
The IMF highlighted fiscal reforms, including the establishment of a new tax policy office to simplify the tax code and reduce reliance on ad hoc measures. It said collaboration between federal and provincial governments was being expanded to improve revenue sharing and financial management. The State Bank of Pakistan, it said, remains focused on maintaining inflation within the target range of 5-7%, adjusting its policy stance as needed based on evolving economic conditions.
In the energy sector, Pakistan has pledged to prevent further accumulation of circular debt by ensuring cost-reflective tariffs, while continuing privatization and efficiency improvements in distribution and generation companies. Reforms are also under way to boost private sector development, improve governance, and reduce state intervention in the economy. Plans include measures to enhance trade competitiveness and productivity, as well as reforms in the agriculture sector to ensure food security.
Under the RSF, Pakistan aims to strengthen resilience against climate change through green mobility initiatives, improved disaster risk financing, and enhanced water system management. “The IMF team expresses its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector, and development partners for their cooperation and hospitality throughout this mission,” it added.