IMF staff agree fourth Pakistan EFF review, unlocking about $1.2bn after Board vote

International Monetary Fund staff reached a staff-level agreement with Pakistan on 7 October on the fourth review of its 37-month Extended Fund Facility (EFF) and the third review of its 28-month Resilience and Sustainability Facility (RSF), which would release about $1.0 billion (SDR 760 million) and about $210 million (SDR 154 million) respectively once the Executive Board approves, according to IMF press release 26/326. Total disbursements under the two arrangements would then reach about $5.7 billion.

The agreement closes a mission led by Iva Petrova that met the authorities in Karachi and Islamabad from 23 September to 7 October and also completed the 2026 Article IV consultation, the release says. It is not yet a disbursement: the Board must still approve the reviews, and the release gives no Board date. The Express Tribune also reported no date for the Board meeting.

The terms matter beyond the cash. The staff tie the next tranche to a budget anchored on an underlying primary surplus of 2.0 per cent of GDP in fiscal year 2027, to the prompt end of a fuel support scheme the government introduced this year, and to a list of governance measures that runs from state-owned enterprise transparency to the anti-corruption institutions, according to the press release.

What the agreement requires

On fiscal policy, the IMF release says the FY27 budget is anchored by the 2.0 per cent primary surplus and calls for a medium-term tax reform strategy, digital invoicing, risk-based audits and better public financial management. Health and education spending is planned to rise to 2.8 per cent of GDP in FY27, from 2.5 per cent in FY26 and 2.2 per cent in FY24.

The Express Tribune reported that the 2.8 per cent target is lower than an earlier figure of nearly 3 per cent because the provinces budgeted less, and that Finance Secretary Imdad Ullah Bosal said Pakistan had met the FY26 condition on health and education spending. Neither point appears in the IMF release.

The fuel support scheme should be phased out promptly, the staff say, and any future support should be limited, time-bound, targeted through existing social programmes and contained within the FY27 budget, according to the release. The newspaper reported that Prime Minister Shehbaz Sharif had announced the scheme as a three-month measure costing PKR 75 billion, compensating PKR 100 per litre on set monthly volumes for motorcyclists and owners of cars up to 800cc, and that the IMF had objected to its untargeted design and cost.

On monetary policy, the staff say the State Bank of Pakistan should keep a tight stance until inflation returns durably to target, let the exchange rate keep absorbing shocks, and continue reserve accumulation and the gradual liberalisation of the foreign exchange regime. In energy, the release asks for timely tariff adjustments and cost-reducing reforms to stop circular debt building again, private participation in electricity distribution, more competition, cost recovery in gas and lower unaccounted-for gas losses.

The governance content

The Article IV section of the release lists the structural agenda as stronger competition, lower regulatory and trade barriers, privatisation, better governance and transparency in state-owned enterprises, and stronger governance and anti-corruption institutions. The release gives no structural benchmarks, dates or targets for these items, and it does not refer to a governance diagnostic. The Express Tribune report does not list prior actions either. The staff report, once published, is the document in which those benchmarks and their status will appear.

The RSF component covers climate measures: climate considerations in public investment, disaster risk financing, irrigation water pricing, better-targeted electricity subsidies, energy-efficiency standards and transport decarbonisation, according to the release.

The numbers behind the review

Real GDP grew 4 per cent in the first three quarters of FY26 and full-year growth is estimated at 3.6 per cent, the IMF says. Headline inflation peaked in May and eased to about 10.3 per cent in September, core inflation stayed contained, and the current account was broadly balanced with support from remittances. Gross reserves stood at about $21.5 billion at end-September. The staff name geopolitical tensions, energy price volatility, tighter global financial conditions and trade disruption as the main risks.

The release describes EFF implementation as broadly on track despite a difficult external environment. The Express Tribune reported that Finance Minister Muhammad Aurangzeb held a wrap-up session with Petrova, attended by Bosal and IMF Resident Representative Mahir Binici, according to the Ministry of Finance.

The next step is the Executive Board's consideration of the two reviews, followed by publication of the staff report with the updated structural benchmark table.