By Staff Reporter
KARACHI: An International Monetary Fund team began discussions with Pakistani officials Wednesday on the fourth review of the country’s $7 billion bailout, a negotiation that will determine whether Islamabad receives its next round of financing after government interventions in commodity markets breached the terms of the program.
The mission, led by Iva Petrova, is examining Pakistan’s compliance with the Extended Fund Facility and a parallel Resilience and Sustainability Facility over the year through June, alongside the Fund’s broader Article IV assessment of the economy. Mahir Banici, the IMF’s resident representative in Islamabad, confirmed the start of talks to local media.
“An IMF team led by Iva Petrova has started discussions with the Pakistani authorities on the review under the Extended Fund Facility and Resilience and Sustainability Facility, alongside the Article IV Consultation,” Banici said.
The visit, expected to run roughly two weeks into early October, opens with technical sessions at the State Bank of Pakistan before shifting to talks with government ministries and a courtesy call on Finance Minister Muhammad Aurangzeb, according to people familiar with the itinerary. A staff-level agreement, if reached, would need approval from the IMF’s Executive Board before any funds are released — a process that has typically taken several weeks in prior reviews.
Success would unlock about $1 billion under the EFF and a further $200 million under the RSF, potentially by late November or early December. That would bring total disbursements under the two facilities to roughly $6 billion, out of $8.4 billion combined committed, since the programs began.
Fiscal Slippages Complicate Talks
Pakistan’s performance against the targets set for the year ended June 30 has broadly held up, but not without notable breaches. The government intervened directly in wheat and sugar markets during the review period, running afoul of a program condition that bars state involvement in commodity trading — a step the Fund has previously flagged as a source of fiscal risk and price distortion in South Asia’s second-largest economy.
The Federal Board of Revenue also fell short of its first-half collection target, a structural benchmark under the program and a recurring point of friction between Islamabad and the Fund since the arrangement’s approval two years ago. Revenue shortfalls have forced the government into mid-year spending adjustments in previous review cycles, and negotiators are likely to revisit tax administration measures as part of the current talks.
Governance reforms present a further complication. Pakistan has implemented only a handful of the more than three dozen targets set for the first half of this year under a broader anti-corruption action plan tied to an earlier IMF diagnostic assessment, according to official assessments of program progress. The government has introduced rules aimed at more transparent procurement by state-owned enterprises, but direct contracting without competitive bidding has continued in practice — a gap the mission is expected to press on during its stay.
Two-Year-Old Program
The IMF’s Executive Board approved the Extended Fund Facility in the final week of September 2024, a 37-month arrangement worth roughly $7 billion, or the equivalent of 5,320 million in the Fund’s Special Drawing Rights. Pakistan followed with a formal request for a separate resilience facility the following month, and the two sides struck a staff-level agreement on a 28-month, $1.3 billion RSF arrangement in March 2025, timed to coincide with the program’s first EFF review.
The parallel facilities have since moved in tandem through successive reviews, with the RSF — designed to help finance longer-term structural adjustments such as climate resilience — running alongside the EFF’s more traditional focus on fiscal consolidation and external stability.
Wednesday’s mission marks the fourth EFF review and third RSF review under the arrangement, following a visit in May that focused on budget strategy for the fiscal year that began in July and on the economic fallout from disruptions tied to the conflict in the Middle East. Pakistani authorities used that visit to reaffirm a commitment to a primary budget surplus equivalent to 2% of gross domestic product for the current fiscal year, a target the Fund has treated as central to debt sustainability in a country that spent much of the past four years on the edge of default.
The current review also comes as Pakistan works through legislative changes the Fund has sought as a condition of continued support, including amendments to the law governing the country’s sovereign wealth fund aimed at strengthening governance and fiscal safeguards, and updates to rules covering several state-owned enterprises.
For a government that has leaned on IMF financing repeatedly since 2019, the stakes extend beyond the immediate disbursement. Pakistan’s foreign reserves and currency stability remain closely tied to continued Fund backing, which in turn underpins access to other multilateral and bilateral financing lines. Any delay in reaching a staff-level agreement would be read by investors as a signal of strain in a relationship that has proven durable but rarely smooth.
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