ISLAMABAD: Pakistan and the International Monetary Fund (IMF) begin formal negotiations on Monday for the fourth review of the $7 billion Extended Fund Facility (EFF) and the third review of the Resilience and Sustainability Facility (RSF).
Finance Ministry has not yet issued any statement on the IMF review. However, reports said the mission has been in Pakistan since last week and is expected to remain here until the first week of October.
The IMF mission, led by Iva Petrova, has already held discussions with the State Bank of Pakistan in Karachi. The Islamabad phase, beginning Monday, will cover the Finance Ministry, Federal Board of Revenue and other government institutions.
Upon successful completion of the reviews and subsequent approval by the IMF Executive Board, Pakistan could receive about $1 billion under the EFF and another $200 million under the RSF, bringing the potential new disbursement to around $1.2 billion.
The review will assess Pakistan’s economic performance and implementation of programme commitments through June 2026, including fiscal targets, tax reforms, monetary policy, energy-sector measures and structural benchmarks.
Pakistan’s legal amendments
A major part of the discussions will involve legislation. Finance Secretary Imdadullah Bosal told the National Assembly Standing Committee on Finance and Revenue last week that the IMF had sought around 174 amendments to various laws.
The proposed changes cover taxation, energy, privatisation, state-owned enterprises, the Sovereign Wealth Fund, sugar policy, Islamic banking, remittances and climate-related reforms.
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The government said it would place the proposed amendments before Parliament, which has the prerogative to approve them.
The Sovereign Wealth Fund is expected to be a key issue. The IMF wants governance and financial reporting arrangements for the fund and state-owned companies under the fund streamlined like other government-owned entities.
The government is also discussing measures for facilitating remittances with the IMF, including ways to reduce payment-system costs. Meanwhile, subsidies, previously used to facilitate remittances, which had exceeded Rs120 billion, have already been withdrawn.
Sugar-sector reforms are another benchmark. The federal government has circulated a draft policy aimed at liberalising the sector, with three provinces supporting the proposal and one raising reservations, according to the finance secretary.
The review is also expected to cover the proposed privatisation of power distribution companies, energy-sector viability, the Tax Policy Office and fiscal consolidation.
The National Assembly committee has called for greater focus on the actual economic and social impact of reforms rather than compliance with programme benchmarks alone.
Pakistan is currently implementing a 37-month EFF programme approved in September 2024, alongside a 28-month RSF arrangement supporting climate-related reforms.
The IMF Executive Board completed Pakistan’s third EFF review and second RSF review in May, allowing disbursements of about $1.1 billion under the EFF and $220 million under the RSF. Total disbursements under the two programmes reached about $4.8 billion at that stage.
The latest review will therefore determine whether Pakistan has met the conditions for the next scheduled financing while also setting the course for further reforms under the IMF programme.
Pakistan and the IMF would reach a staff-level agreement before submitting it to the Fund’s Executive Board for final approval.
Neither the government of Pakistan nor the IMF visiting mission made any formal announcement at the start of the formal Islamabad talks.
