Key points
- Pakistan’s policy priorities include progress on fiscal structural reforms
- Pakistan remains committed to improving public financial management: IMF
- Global lender says recognising full impact of recent rate cuts still to be felt
- Pakistan has also committed to continuing fundamental cost-reducing reforms
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement on the first review under Pakistan’s 37-month $7 billion Extended Fund Facility (EFF) and a new 28-month $1.3 billion arrangement under the Resilience and Sustainability Facility (RSF).
Advisor to Pakistan’s Finance Minister Khurram Schehzad confirmed the development on Wednesday.
Upon board approval, Pakistan will have access to about $1 billion under the EFF, bringing total disbursements under the EFF to about $2 billion, Khurram Schehzad wrote on X.
He said Pakistan was making significant strides in economic reforms, focusing on tax equity, monetary stability, energy sector transformation, and climate resilience.
IMF Staff and the Pakistani authorities have reached a staff-level agreement on the first review under Pakistan’s 37-month $7bn Extended Fund Facility (EFF) and on a new 28-month $1.3bn arrangement under the Resilience and Sustainability Facility (RSF).
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— Khurram Schehzad (@kschehzad) March 26, 2025
Schehzad noted that these efforts are supported by the IMF, laying the foundation for a sustainable and prosperous future.
Discussions with Pakistani officials
This development comes after an IMF team, led by Nathan Porter, held discussions with Pakistani officials between February 24 and March 14, 2025, in Karachi and Islamabad. Both sides also held virtual huddles.
According to a statement issued by the IMF, Porter stated after the discussions that “The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF), and on a new 28-month arrangement under the IMF’s RSF with total access over the 28 months of around $1.3 billion (SDR 1 billion).”
The staff-level agreement is subject to the approval of the IMF’s Executive Board. Upon approval, Pakistan will have access to about $1.0 billion (SDR 760 million) under the EFF, bringing total disbursements under the program to about US$2.0 billion, the statement noted.
“The authorities reiterated their commitment to the EFF-supported program and plan to supplement their efforts by advancing reforms under the RSF-supported program aiming to address long-standing economic vulnerabilities to climate shocks and build resilience,” the IMF communique read.
Pakistan’s policy priorities
Pakistan’s policy priorities include making further progress on fiscal structural reforms.
“The authorities are determined to continue efforts to enhance revenue mobilisation, spending efficiency, and transparency, broadening the tax base. Notably, all four provinces have amended their Agriculture Income Tax (AIT) regimes—an important step towards greater tax equity and expanding the tax base—although effective implementation is crucial to the AIT’s success and greater fiscal devolution in FY26.”
IMF statement said the authorities also remain committed to improving public financial management, ensuring spending transparency through the electronic Pakistan Acquisition and Disposal System (e-PADS), and developing debt management to strengthen sustainability and governance.
Pakistan will reportedly maintain tight monetary policy during the period.
“Recognising that the full impact of recent rate cuts is still to be felt, the authorities will continue with an appropriately tight and data-dependent monetary policy to ensure inflation remains anchored within the State Bank of Pakistan’s (SBP) medium-term target range of 5–7 percent. They are committed to preserving a fully functioning foreign exchange market to support exchange rate flexibility while rebuilding FX reserve buffers.”
Pakistan has also committed to continuing fundamental cost-reducing reforms in the energy sector to enhance viability and lower tariffs.
“The authorities’ timely implementation of electricity and gas tariff adjustments, along with the early impact of reforms, has helped reduce the stock and flow of the sector’s circular debt, and both should remain a priority. It is necessary to accelerate cost-side reforms, including improving distribution efficiencies, integrating captive power into the electricity grid, enhancing the transmission system, privatizing inefficient generation companies, and expanding renewable energy adoption,” the IMF mission said.
Structural reform agenda
Delivering a structural reform agenda to reduce inefficiencies, boost productivity, and support private sector development will also be among the top priorities of the government.
Pakistan will advance their efforts to fully implement the SOE governance framework across all SOEs while adopting appropriate governance mechanisms and safeguards for the Pakistan Sovereign Wealth Fund (PSWF).
They will further strengthen institutional capacity to fight corruption and significantly reduce trade barriers to support inclusive growth and a level playing field for business and investment, the mission noted.
The South Asian nation will scale up climate reform efforts to reduce vulnerabilities to natural disaster risks and to build climate resilience.
“Supported by the RSF, the authorities’ program is committed to: (i) strengthening public investment processes across all levels of government to prioritize projects that enhance disaster resilience; (ii) improving the efficiency of scarce water resource usage, including through better pricing mechanisms; (iii) enhancing intergovernmental coordination on disaster financing; (iv) improving information architecture and disclosure of financial and corporate climate-related risks; and (v) promoting green mobility to mitigate significant pollution and adverse health impacts.”
