IMF Reaches Staff-Level Agreement With Pakistan on 4th EFF Review, Unlocking $1.2 Billion Loan

Notably, the International Monetary Fund reached a staff-level agreement with Pakistan on the fourth review of its Extended Fund Facility and the third review of its Resilience and Sustainability Facility.

Key points

• The IMF team, led by Iva Petrova, held discussions in Karachi and Islamabad from September 23 to October 7, 2026.
• On social spending, the IMF remarked health and education outlays rose from 2.2 percent of GDP in FY24 to 2.5 percent in FY26.
• The IMF estimated real GDP expansion at 3.6 percent for fiscal 2026.
• Headline inflation eased to regarding 10.3 percent in September after peaking in May.
• The agreement could release regarding $1.2 billion once the IMF Executive Board approves it.

Notably, the agreement could release regarding $1.2 billion once the IMF Executive Board approves it.

In practice, the accord clears the way for roughly $1.0 billion (SDR 760 million) under the Extended Fund Facility and concerning $210 million (SDR 154 million) under the Resilience and Sustainability Facility. Total disbursements under the two arrangements would then reach regarding $5.7 billion.

In practice, the IMF team, led by Iva Petrova, held discussions in Karachi and Islamabad from September 23 to October 7, 2026. The discussions additionally covered the 2026 Article IV consultation.

"Supported by the EFF, the authorities have successfully navigated the impact of the Middle East conflict, and strong policies have helped preserve macroeconomic stability, " Petrova remarked in an official note. Economy Holds Up Despite Shocks.

Notably, the IMF estimated real GDP expansion at 3.6 percent for fiscal 2026. Expansion reached 4 percent in the first three quarters, then slowed as higher energy costs and supply disruptions weighed on momentum.

Headline inflation eased to regarding 10.3 percent in September after peaking in May. Core inflation stayed contained. The current account was broadly balanced in FY26, supported by robust remittances. Gross reserves rose to regarding $21.5 billion by the end of September.

In practice, the Fund remarked sovereign rating upgrades and renewed access to international markets point to stronger policy credibility. It cautioned that risks remain high, citing geopolitical tensions, volatile energy rates, tighter global financial conditions and trade disruptions.

For context, the IMF remarked Islamabad should keep to the FY27 budget. It is built around an underlying primary surplus of 2.0 percent of GDP. It pressed revenue administration reforms, including risk-based audits, digital invoicing and the apply of third-party data. It additionally called on a medium-term tax reform strategy to create the system "fairer, simpler, and more growth friendly."

On social spending, the IMF remarked health and education outlays rose from 2.2 percent of GDP in FY24 to 2.5 percent in FY26. The administration has committed to raising them to 2.8 percent in FY27. The Fund additionally called on the administration to phase out the fuel backing scheme promptly, citing its high cost and broad targeting. Any future fuel backing should be limited, time-bound and targeted through established social assistance programs.

In practice, the IMF remarked the State Bank of Pakistan should keep policy appropriately tight so that inflation returns durably to its target range. It additionally called on continued exchange rate flexibility as a shock absorber, along with further reserve accumulation and gradual liberalization of the foreign exchange regime.

In the energy sector, the Fund pressed timely tariff adjustments and cost-reducing reforms to prevent renewed circular debt. It additionally called on more private participation in distribution, deeper electricity market competition, gas sector cost recovery and lower unaccounted-for gas losses. Structural and Climate Reforms.

For context, the Article IV consultation focused on structural reforms. These include strengthening competition, reducing regulatory and trade barriers, advancing privatization, improving governance and transparency at state-owned enterprises, and strengthening anti-corruption institutions.

Under the RSF, Pakistan is working to build climate resilience. The IMF cited progress in factoring climate into public investment planning and in disaster risk financing. Further reforms are under way on irrigation water pricing and collection, better-targeted electricity subsidies, energy-efficiency standards and transport decarbonization.

In practice, the staff-level agreement remains subject to approval by the IMF Executive Board. Stay Connected with ProPakistani.

Obtain the latest business news, market insights, and economic updates wherever you prefer. Follow on Google Discover. Follow on Google News Join WhatsApp. See more ProPakistani stories in Google Search and Top Stories.

For now, IMF Reaches Staff-Level Agreement With Pakistan on 4th EFF Review, Unlocking $1.2 remains the part of the story worth watching, and further updates are likely as more details are confirmed.