Pakistan and the International Monetary Fund (IMF) have made significant progress toward reaching a staff-level agreement (SLA) on key economic reviews under the $8.4 billion Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) programs, the Fund announced on Thursday.
The statement followed two weeks of policy discussions led by IMF Mission Chief Iva Petrova in Karachi and Islamabad from September 24 to October 8, focused on fiscal reforms, climate resilience, and economic stabilisation measures.
Talks Yield Progress on Fiscal and Structural Reforms
According to the IMF, both sides advanced discussions on fiscal consolidation to strengthen public finances while maintaining support for flood recovery efforts. The Fund highlighted Pakistan’s “strong program implementation” and said its policies remained aligned with reform commitments.
Petrova noted that Pakistan had made headway in maintaining a tight, data-driven monetary policy to control inflation, restoring the viability of the energy sector through tariff reforms, and reducing the state’s footprint in key industries to promote private sector competitiveness.
Productive talks were also held on measures to strengthen climate resilience under the RSF, which aims to help Pakistan manage environmental and disaster-related risks.
Next Steps and Ongoing Reforms
Both parties agreed to continue policy discussions to resolve any remaining issues ahead of the next IMF Board review. The Fund expressed sympathy for communities affected by the recent monsoon floods and appreciated Pakistan’s cooperation during the mission.
Meanwhile, Pakistan and the IMF have also discussed a tariff rationalisation plan, agreeing to abolish the car import schemes under the baggage and gift rules and tighten conditions for the Transfer of Residence scheme to prevent misuse.
In addition, Islamabad has initiated reforms to strengthen its anti-corruption framework. A task force has recommended amendments to laws governing civil servants, advisers, and public institutions to ensure asset transparency, improve prosecution quality, and enhance inter-agency coordination between the FIA, NAB, and provincial anti-corruption bodies.
Outlook and Economic Context
The IMF mission coincided with Prime Minister Shehbaz Sharif’s recent meeting with IMF Managing Director Kristalina Georgieva in New York, where he urged flexibility in light of the devastating floods that have killed over 1,000 people and caused Rs370 billion ($1.3 billion) in damages.
The World Bank recently revised Pakistan’s FY2026 growth forecast down to 2.6% from 3.1%, citing flood-related disruptions. However, the IMF expects growth to strengthen as reforms advance, inflation stabilises, and fiscal discipline improves.
Finance Minister Muhammad Aurangzeb and senior officials are set to attend the upcoming World Bank-IMF annual meetings in Washington, where additional discussions are expected to finalise the SLA.
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