IMF executive board to meet on May 8 to approve disbursement of over $1.2bn to Pakistan

Pakistan has qualified for the disbursement of about $1bn after the successful third review of EFF and $210 million under the second review of RSF.

The IMF announced on March 27 that it had reached a staff-level agreement for the disbursement of about $1.2bn on the successful conclusion of the third review under EFF and the second review under RSF.

The two sides have since been engaged in changes to fuel pricing and the elimination of subsidies to meet the petroleum levy target budgeted at Rs1.47 trillion for the current fiscal year.

The petroleum levy’s collection has already gone beyond Rs1.2tr in the first nine months of the current fiscal year despite the government’s claim of subsidising diesel. The levy seems set to cross the Rs1.47tr target with ease in the remaining three months of the fiscal year.

However, the government is still considering increasing the levy on petrol or reviving the levy on diesel to make up for the Federal Board of Revenue’s shortfall. The Fund has also been advising the government to phase out the fuel subsidy.

Moreover, Pakistan has been holding discussions with the IMF regarding flexibility in its programme’s contours, which would be finalised in next year’s budget. The finance minister recently announced that Pakistan was committed to fiscal discipline while seeking flexibility in light of evolving global and regional challenges.

While announcing the SLA on March 27, IMF said the programme’s implementation by Pakistan under the EFF remained broadly aligned with the authorities’ objectives to strengthen public finances, ensure inflation remains durably within the State Bank of Pakistan’s target range, advance reforms to improve the viability of the energy sector, and deepen structural reforms, while strengthening social protection and rebuilding health and education spending.

The authorities’ climate reform agenda, backed by the RSF, is progressing, and the authorities remain committed to implementing comprehensive reforms and policies that enhance resilience and reduce vulnerabilities to climate-related risks.

The talks were held in-person in Karachi and Islamabad from February 25 to March 2 and virtually afterwards.

According to IMF mission chief Iva Petrova, subject to IMF board’s approval, Pakistan will have access to about US$1bn under the EFF and about US$210m under the RSF, bringing total disbursements under the two arrangements to about US$4.5bn.

Supported by the EFF, ongoing policies have continued to strengthen the economy and rebuild market confidence.

IMF had earlier stated that following recovery in FY25, economic activity gained further momentum in the first part of the current fiscal year. Inflation and the current account balance remained contained, and external buffers continued to strengthen.

The conflict in the Middle East, however, cast a cloud over the outlook as volatile energy prices and tighter global financial conditions risk putting upward pressure on inflation and weighing on growth and the current account.

The authorities remained committed to pursuing sound and prudent macroeconomic policies to preserve the recent gains in macro-financial stabilisation, while deepening structural reforms to accelerate growth and strengthening social protection to mitigate the impact of volatile energy prices on the most vulnerable.

Pakistan has committed to the IMF to ensure a sustainable fiscal position and reduce the public debt burden to more moderate levels over the medium term. To this end, efforts are ongoing to meet the FY26 budget primary surplus of 1.6 per cent of GDP and to target an underlying primary balance of 2pc of GDP in FY27, supported by measures to broaden the tax base and strengthen expenditure discipline, while expanding health, education, and social protection spending and strengthening federal-provincial burden sharing.

The government has also given an undertaking of the steadfast implementation of fiscal reforms, critical to achieving the fiscal objectives through revenue mobilisation by reforming key performance indicators to monitor progress. These priorities include strengthening taxpayer audits, expanding the use of digital invoicing and production monitoring, and enhancing the FBR’s internal governance.