IMF Clears $1.2 Billion Funding Deal for Pakistan Amid Reform Push

Washington, March 2026 : The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan that could unlock approximately $1.2 billion in fresh financial assistance, signalling continued international support as the country advances economic reforms and stabilisation efforts.

The agreement follows detailed discussions between IMF officials and Pakistani authorities during the third review of the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF). While the deal marks a key milestone, it remains subject to final approval by the IMF’s Executive Board.

Once cleared, Pakistan is expected to receive about $1.0 billion under the EFF and an additional $210 million through the RSF. This would bring total disbursements under the ongoing programmes to nearly $4.5 billion, providing crucial support to the country’s external finances.

According to the IMF, Pakistan’s progress under the programme has remained “broadly aligned” with agreed objectives, including strengthening fiscal discipline, curbing inflation, and implementing structural reforms. The Fund noted encouraging signs in the economy, with growth gaining momentum following a recovery in the last fiscal year. Inflationary pressures and the current account deficit have shown signs of easing, while foreign exchange reserves have improved.

Despite these gains, the IMF cautioned that external risks remain significant. Ongoing tensions in the Middle East could impact Pakistan through fluctuations in global energy prices and tighter financial conditions, potentially affecting economic stability.

To address these challenges, Pakistani authorities have committed to maintaining a prudent fiscal strategy aimed at reducing public debt. The government is targeting a primary budget surplus of 1.6 percent of GDP in FY26, rising to 2 percent in FY27, reflecting a sustained effort to restore fiscal balance.

Revenue mobilisation remains a central pillar of the reform agenda. The Federal Board of Revenue is undertaking measures such as enhanced tax audits, broader documentation of the economy, and the introduction of digital monitoring systems. In addition, a newly established Tax Policy Office is working on a medium-term strategy to strengthen the country’s tax framework.

On the monetary front, the State Bank of Pakistan is expected to remain vigilant. The IMF indicated that interest rates could be raised if inflation resurges, while a flexible exchange rate will continue to serve as a buffer against external shocks.

Energy sector reforms also remain a top priority, with the government focusing on reducing circular debt, ensuring cost recovery, and improving efficiency through privatisation and better governance.

The agreement underscores cautious optimism about Pakistan’s economic trajectory, while highlighting the need for sustained reforms to secure long-term stability.