Washington, March 25, 2025 – Pakistan has successfully reached a staff-level agreement with the International Monetary Fund (IMF) on the first review of its Extended Fund Facility (EFF) and a new arrangement under the Resilience and Sustainability Facility (RSF).
This development marks a crucial step in Pakistan’s ongoing economic stabilization and reform efforts.
The Pakistani authorities have demonstrated strong implementation of the EFF-supported program, reinforcing their commitment to gradual fiscal consolidation aimed at reducing public debt sustainably. Additionally, they are maintaining a tight monetary policy to keep inflation low, expediting cost-reducing energy sector reforms to improve efficiency, and implementing broader economic reforms to accelerate growth. At the same time, efforts are being made to strengthen social protection, healthcare, and education spending.
Under the RSF, Pakistan will work on enhancing its resilience to natural disasters, improving budgetary and investment planning to promote climate adaptation, optimizing water resource management, strengthening climate information disclosure, and aligning energy sector reforms with global mitigation targets.
An IMF delegation, led by Nathan Porter, conducted discussions in Islamabad and Karachi from February 24 to March 14, 2025. Following these deliberations, Porter announced the staff-level agreement on the first review of Pakistan’s 37-month EFF arrangement and a new 28-month RSF arrangement, granting Pakistan access to around $1.3 billion under the RSF. The agreement now awaits the IMF Executive Board’s approval, upon which Pakistan will receive approximately $1.0 billion under the EFF, raising total disbursements to $2.0 billion.
Despite global economic challenges, Pakistan has made significant progress in stabilizing its economy over the past 18 months. Inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed, and external balances have strengthened. However, the nation still faces risks, including policy slippages, geopolitical shocks, and climate-related challenges. These threats highlight the importance of sustaining progress through prudent macroeconomic policies and resilience-building measures.
To maintain economic stability, the Pakistani authorities have committed to continuing fiscal consolidation to reduce public debt while ensuring adequate spending on social and developmental programs. The FY25 target includes achieving a primary surplus of at least 1.0% of GDP, with a continued fiscal adjustment strategy in FY26. The government has pledged to preserve social programs like the Benazir Income Support Programme (BISP) while making savings on energy subsidies and prioritizing development expenditures.
Fiscal reforms remain a priority, with efforts focused on revenue mobilization, improving spending efficiency, and enhancing transparency. Pakistan has already made strides in expanding the tax base through amendments to the Agriculture Income Tax (AIT) regimes in all provinces, though effective implementation remains key. Additionally, improvements in public financial management and debt sustainability are being pursued through digital initiatives like the Pakistan Acquisition and Disposal System (e-PADS).
The authorities also recognize the need for a tight monetary policy to keep inflation within the State Bank of Pakistan’s (SBP) medium-term target of 5–7%. Additionally, they are committed to a fully functioning foreign exchange market to maintain exchange rate flexibility and rebuild FX reserves.
Energy sector reforms remain critical for reducing costs and improving sustainability. Pakistan’s timely tariff adjustments have helped manage circular debt, but further efficiency measures, privatization of inefficient entities, and expansion of renewable energy are necessary to enhance viability.
Structural reforms to reduce inefficiencies and promote private sector-led growth are also on the agenda. This includes implementing governance frameworks for state-owned enterprises (SOEs), strengthening the Pakistan Sovereign Wealth Fund (PSWF), and enhancing anti-corruption mechanisms to foster a business-friendly environment.
Pakistan is also prioritizing climate resilience under the RSF, focusing on strengthening public investment in disaster-resistant projects, improving water management through better pricing mechanisms, and enhancing intergovernmental coordination on disaster financing. The country is also working towards improved climate risk disclosure and promoting green mobility solutions to mitigate pollution.
The IMF acknowledged the Pakistani government’s dedication to reform and expressed gratitude for the productive discussions held in Islamabad and Karachi. The agreement under the EFF and RSF reflects Pakistan’s commitment to economic stability and resilience-building, reinforcing its long-term growth trajectory.