IMF staff-level deal delayed amid Middle East crisis

• Lender, govt remain tight-lipped on review outcome• War tensions cloud fiscal, economic projections• Final session focuses on FBR transformation plan• Budget discussions may continue until IMF-WB spring meetings

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) could not reach a staff-level agreement (SLA) on the third review of the country’s $7 billion Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF) within the scheduled timeframe on Wednesday and decided to continue discussions.

Official sources said the evolving geopolitical situation had created uncertainty around many areas, particularly related to the fiscal and monetary outlook for the remaining quarter of the current fiscal year and its spillover into the next year, making projections increasingly unclear.

It was noted that, given the volatile situation, Pakistan’s oil import bill could not be estimated with precision, nor could the potential impact on export orders if the Middle East crisis — particularly a prolonged closure of the Strait of Hormuz — continued. Therefore, projections for the current and trade accounts as well as fiscal balances remained fluid despite existing forecasting models.

Both the IMF and Pakistani authorities remained tight-lipped about the outcome of the talks and did not respond to requests for comment. The Fund also did not issue its customary end-of-mission statement.

The IMF mission led by Iva Petrova “is facing more uncertainties than us about the geopolitical situation and its economic impact not only on Pakistan but around the global economy,” a senior government official said.

The major issue remains the next year’s budget, he said, adding that it was unclear if talks would conclude with an SLA in two to three days.

The final session of the discussions, held from Feb 25 to March 11, focused on a transformation plan of the Federal Board of Revenue (FBR) on Wednesday and the two sides agreed to hold another round on next year’s budget on Thursday, the official said.

He added that talks had already shifted to a virtual mode and would not make any big difference if they continue for two, three or more days.

Given the uncertain global environment, discussions related to the next year’s budget may continue even during the IMF-World Bank Spring Meetings in April and possibly into May before the budget is finalised.

Officials said the review of Pakistan’s end-December 2025 fiscal, monetary and economic performance did not face major hurdles, except for concerns related to revenue targets and the tax-to-GDP ratio.

The IMF mission is expected to convey its final position on the revenue side within a day or two, a senior official said.

Sources said the mission’s engagements with the provinces were relatively smooth and focused mainly on their committed cash surpluses to the federal government, aimed at keeping fiscal and primary balances within agreed targets for the current year.

However, provincial authorities indicated that their higher-than-targeted surpluses in the first half of the fiscal year might not remain as strong in the second half due to seasonal spending patterns and planned expenditures in the final quarter.

The IMF review mission has been in talks with Pakistani authorities since Feb 25 for the third review of the EFF programme and the second review of the RSF facility. Discussions moved online on March 3 following the US-Israel attacks on Iran and were originally scheduled to conclude on March 11.

Upon successful completion of the review, Pakistan would become eligible to receive about $1bn (760 million Special Drawing Rights) under the EFF and around $200m under the RSF by the end of April.

Published in Dawn, March 12th, 2026