By Staff Reporter
ISLAMABAD: The International Monetary Fund’s staff mission in Pakistan switched its talks with authorities to virtual format on Monday after relocating to Istanbul on security advice from Washington headquarters, following U.S. and Israeli strikes on Iran.
The mission, led by Iva Petrova, had been conducting in-person meetings in Karachi and Islamabad for the third review of the $7 billion Extended Fund Facility and the second review of the $1.1 billion Resilience and Sustainability Facility. Sectoral sessions planned for the day were disrupted, though the rest of the schedule will proceed unchanged via video link, the IMF said.
“An IMF mission led by Iva Petrova has started discussions with the authorities in Karachi and Islamabad on the third review of Pakistan’s Extended Fund Facility arrangement and the second review of the Resilience and Sustainability Facility,” the fund said in a statement. “Discussions will continue to be held virtually.”
The shift came hours after a kick-off meeting in Islamabad chaired by Finance Minister Muhammad Aurangzeb. Both sides touched on the emerging regional security situation but expressed uncertainty over how long the crisis would last or its full economic impact. They agreed to monitor developments closely and prepare contingency measures as negotiations advance.
The mission began technical discussions with the State Bank of Pakistan and business leaders in Karachi on Feb. 25. Formal policy-level talks started Monday and are set to run through technical sessions with ministries and agencies until this weekend, followed by higher-level discussions early next week. A wrap-up meeting with Aurangzeb is scheduled for March 11.
The reviews cover Pakistan’s performance for the half-year ended Dec. 31, 2025, as well as forward-looking commitments that will shape the next budget. That includes provincial fiscal performance, agriculture income tax implementation, governance issues and an action plan to tackle weaknesses blamed for trillions of rupees in losses. Procurement and accountability bodies face particular scrutiny over their independence, capacity and processes.
Program performance through December was broadly on track, though revenue fell short of targets. Officials expect the gap to narrow after the Federal Constitutional Court upheld the government’s position on the super tax. The tax-to-GDP ratio stayed within program limits. Macroeconomic indicators for the ongoing third quarter will also be examined. The power sector remains a focus amid recent policy volatility on industrial tariffs and residential fixed charges, even as circular debt stays inside the target range.
Pakistan met almost all quantitative performance criteria for the review period but lagged on some indicative targets and structural benchmarks, which could complicate future implementation. On the technical side, the country is expected to clear nearly all seven quantitative performance indicators. Net international reserves are seen slightly below the September 2025 benchmark of $7 billion and the December target of $6.5 billion. The central bank’s net domestic assets are projected at 12.5 trillion to 13.5 trillion rupees, comfortably under the ceiling of 14.9 trillion to 15.1 trillion rupees for both periods.
A successful staff-level agreement would unlock about $1 billion under the EFF and $200 million under the RSF by the end of April, subject to executive board approval. Pakistan has already drawn roughly $3.3 billion combined from the two facilities.
The talks carry added weight because they set the contours for next year’s budget and provincial finances. Aurangzeb said last week that Pakistan was “well-positioned” for a successful review. The program, approved in September 2024, was designed to restore macroeconomic stability after a balance-of-payments crisis, runaway inflation and depleted reserves. A separate climate-focused Resilience and Sustainability Facility was secured later that year.
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