IMF Nears Staff-Level Agreement With Pakistan Amid Economic Reforms and Flood Recovery

The International Monetary Fund (IMF) has announced that it has made “significant progress” in negotiations with Pakistan, moving closer to a staff-level agreement (SLA) under its ongoing financial support programs.

IMF–Pakistan Talks Near Key Milestone

An IMF mission, led by Iva Petrova, held meetings with Pakistan’s economic team in Karachi and Islamabad between September 24 and October 8. The discussions focused on the implementation of the $7 billion Extended Fund Facility (EFF) and the $1.1 billion Resilience and Sustainability Facility (RSF).

According to the IMF, Pakistan’s program performance for the period ending June 2025 has been “mixed,” though policy implementation remains strong and aligned with government commitments.

Focus on Fiscal Stability, Inflation Control, and Energy Reforms

Petrova stated that progress was made in several key areas:

• Fiscal consolidation to improve public finances while supporting flood recovery efforts.

• Maintaining a tight and data-driven monetary policy to keep inflation within the State Bank of Pakistan’s (SBP) target range.

• Energy sector reforms, including regular tariff adjustments and measures to cut costs.

• Advancing structural reforms to enhance transparency, reduce state intervention, boost competitiveness, and liberalize commodity markets.

She added that discussions also covered climate resilience measures under the RSF, highlighting Pakistan’s efforts to strengthen its economic sustainability amid climate-related challenges.

IMF Appreciates Pakistan’s Efforts Amid Flood Challenges

The IMF expressed its sympathy for those affected by recent floods, acknowledging the government’s cooperation and the productive discussions with officials, private stakeholders, and development partners during the mission.

Last month, Prime Minister Shehbaz Sharif had requested the IMF to factor in the flood-related damages during the program review, urging for flexibility in Pakistan’s economic targets.

Next Steps: Policy Talks to Continue in Washington

Sources indicate that further discussions could take place on the sidelines of the World Bank–IMF Annual Meetings in Washington in the coming days to finalize outstanding issues.

Finance Minister Muhammad Aurangzeb will travel to the United States later this week with a high-level delegation, including the Finance Secretary, SBP Governor, and FBR Chairman.

Islamabad will be required to submit verified flood-loss estimates and ensure that provincial governments absorb the costs without affecting their cash surplus targets. For the current fiscal year:

• Punjab must provide Rs740 billion,

• Sindh Rs370 billion,

• Khyber Pakhtunkhwa Rs220 billion, and

• Balochistan Rs185 billion.

Tax Measures Not on the Table — For Now

Officials said that the talks have been smooth so far, and there is no immediate plan for new tax hikes. However, revenue targets could be revised after first-quarter GDP data is released in December 2025.

If shortfalls appear, policy adjustments or new measures could be introduced from January 1, 2026, aligning with the biannual IMF review schedule.

Pakistan’s IMF Program at a Glance

• A $7 billion bailout package was signed in July 2024 to stabilize the economy.

• In May 2025, the IMF approved an additional $1 billion loan to strengthen Pakistan’s climate resilience.

• Future disbursements are contingent upon successful program reviews under the EFF.

Key Takeaway

• IMF–Pakistan talks have made strong headway toward a staff-level agreement.

• Fiscal discipline, energy reforms, and climate resilience are central to the program.

• No new taxes for now, but revisions may follow GDP data.

• Final negotiations are expected during Washington meetings later this month.