By Staff Reporter
ISLAMABAD: The International Monetary Fund plans to convene its executive board on May 8 to sign off on more than $1.2 billion in fresh financing for Pakistan, the latest tranche under two concurrent programs aimed at shoring up the country’s public finances and building resilience against climate risks.
The disbursement comprises roughly $1 billion following the successful third review of the $7 billion Extended Fund Facility and $210 million under the second review of the Resilience and Sustainability Facility, IMF officials said. The funds would bring total disbursements under the two arrangements to about $4.5 billion.
The move follows a staff-level agreement reached on March 27, after which Pakistani authorities and IMF teams worked through adjustments to fuel pricing and the phase-out of subsidies to ensure the government meets its petroleum levy target of Rs1.47 trillion for the current fiscal year. Collections have already exceeded Rs1.2 trillion in the first nine months, even as the government has maintained it is subsidizing diesel. Officials expect the levy to clear the full-year target comfortably in the remaining three months.
Still, the government is weighing further increases in the levy on petrol or the reimposition of one on diesel to offset shortfalls at the Federal Board of Revenue. The IMF has repeatedly urged Islamabad to eliminate fuel subsidies entirely.
Pakistani officials have also held talks with the Fund on securing greater flexibility in the program’s parameters, changes that would be reflected in next year’s budget. Finance Minister Muhammad Aurangzeb has publicly reaffirmed the government’s commitment to fiscal discipline while flagging the need for some room to maneuver amid shifting global and regional conditions.
In its March 27 announcement of the staff-level deal, the IMF said Pakistan’s implementation of the EFF program had stayed broadly on track with the authorities’ goals of strengthening public finances, keeping inflation durably within the State Bank of Pakistan’s target range, improving the viability of the energy sector, and advancing deeper structural reforms. Social protection spending has been protected and health and education outlays are being rebuilt.
The parallel RSF-supported climate reform agenda is also progressing, with authorities committed to policies that enhance resilience and reduce exposure to climate-related shocks. The latest discussions took place in person in Karachi and Islamabad from Feb. 25 to March 2, followed by virtual talks. IMF mission chief Iva Petrova said that, subject to board approval, Pakistan would receive the $1 billion under the EFF and $210 million under the RSF.
Policies backed by the EFF have continued to bolster the economy and restore market confidence, the Fund has noted. After a recovery in fiscal 2025, economic activity picked up further momentum in the early months of the current fiscal year. Inflation and the current-account balance have remained contained, while external buffers have strengthened.
The conflict in the Middle East has introduced uncertainty, with volatile energy prices and tighter global financial conditions threatening to push inflation higher and weigh on growth and the external balance. Pakistani authorities have reiterated their commitment to sound macroeconomic policies to lock in recent gains in stabilization while pressing ahead with structural reforms to lift potential growth and expanding social safety nets to shield the most vulnerable from energy-price swings.
On the fiscal front, Pakistan has pledged to achieve a sustainable debt position and bring the public-debt burden down to more moderate levels over the medium term. That includes delivering a primary surplus of 1.6 percent of gross domestic product in fiscal 2026 and an underlying primary balance of 2 percent of GDP in fiscal 2027. The targets will be supported by measures to broaden the tax base, tighten expenditure controls, expand spending on health, education and social protection, and improve burden-sharing between the federal and provincial governments.
The government has also committed to steadfast implementation of fiscal reforms centered on revenue mobilization. Key performance indicators will track progress on strengthening taxpayer audits, widening the use of digital invoicing and production monitoring, and improving internal governance at the Federal Board of Revenue.
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