Key Points
- IMF says Pakistan’s reforms under the $7 bn programme have stabilised the economy
- Primary surplus at 1.3% of GDP; inflation contained
- First current account surplus in 14 years recorded in FY25
- Review talks from February 25 to shape next budget and unlock $1.2bn
ISLAMABAD: The International Monetary Fund credited Pakistan’s reform drive under its $7 billion Extended Fund Facility with helping stabilise the economy and rebuild market confidence, setting the stage for a critical programme review later this month.
IMF Communications Director Julie Kozack told a weekly press briefing that Pakistan’s policy efforts under the Extended Fund Facility had yielded tangible macroeconomic gains.
She pointed to a primary fiscal surplus of 1.3 per cent of gross domestic product, describing fiscal performance as strong and aligned with programme targets.
Headline inflation, she said, has remained relatively contained, and Pakistan posted its first current account surplus in 14 years during fiscal year 2024-25.
The remarks come at a pivotal moment for Islamabad, which entered the Extended Fund Facility after a period of severe external financing stress marked by dwindling foreign exchange reserves, currency volatility and high inflation. The IMF programme, approved last year, is designed to anchor structural reforms, restore fiscal discipline and strengthen external buffers.
Review mission and budget talks
An IMF mission led by Iva Petrova is scheduled to arrive on February 25 for discussions on the third review of the Extended Fund Facility and the second review of the $1.1bn Resilience and Sustainability Facility. The talks, expected to run until around March 11, will assess performance through December 2025.
Beyond technical benchmarks, the discussions are expected to shape the broad contours of the 2026-27 federal budget.
Provincial fiscal performance, revenue mobilisation and expenditure rationalisation are likely to feature prominently, as the Fund has consistently emphasised the need for durable, structural improvements rather than one-off adjustments.
Officials state that most quantitative targets for the review period have been achieved. However, revenue collection has fallen short of target projections. Authorities contend that a recent ruling by the Federal Constitutional Court in favour of the government on the continuation of the super tax could help close the gap in the coming months.
Disbursement and reform agenda
Completion of the review would unlock approximately $1 billion, or about 760 million Special Drawing Rights, under the Extended Fund Facility, along with an additional $200m under the Resilience and Sustainability Facility by the end of April.
These inflows are seen as crucial for maintaining external stability and catalysing financing from other multilateral and bilateral partners.
Kozack also drew attention to the IMF’s recent Governance and Corruption Diagnostic assessment of Pakistan, which recommended simplifying tax policy design, ensuring competitive neutrality in public procurement, and strengthening transparency in asset declarations. The report forms part of a broader push to address institutional weaknesses that have historically undermined fiscal sustainability.
Analysts say the Fund’s endorsement of recent macroeconomic trends could reinforce investor sentiment. However, sustaining gains will depend on continued implementation of reforms, political consensus and disciplined fiscal management as Pakistan prepares its next budget cycle.
