ISLAMABAD: The International Monetary Fund (IMF) reached a staff-level agreement with Pakistan on Thursday, unlocking roughly $1.2 billion in financing pending board approval, the international financial institute said Friday.

According to a statement released by IMF Communications Department, the agreement concludes the third review of a 37-month Extended Fund Facility and the second review of a 28-month Resilience and Sustainability Facility arrangement.

Pakistan would draw approximately $1 billion from the EFF and $210 million from the RSF once the board signs off. Cumulative payouts across both programs would then stand at around $4.5 billion.

IMF Reaches Staff-Level Agreement on the Third Review for the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and the Second Review for 28-month Arrangement Under the Resilience and Sustainability Facility (RSF) – Pakistan https://t.co/hYPsALIpbn
— Ministry of Finance, Government of Pakistan (@Financegovpk) March 28, 2026

The deal remains subject to approval by the Fund's Executive Board.

Iva Petrova led the IMF delegation during in-person talks with Pakistani officials in Karachi and Islamabad from Feb. 25 to March 2. Discussions continued remotely in the weeks that followed.

The Fund described Pakistan's near-term economic outlook as improving. Output picked up pace in the first part of the current fiscal year, following a broader rebound in FY25. Price pressures and the trade balance have stayed manageable, and the country's foreign reserve position has continued to recover, the IMF noted.

The Fund warned that ongoing conflict in the Middle East poses the most immediate threat to that trajectory. Swings in global energy costs and tightening international financing conditions could reignite inflation and drag on output.

According to the IMF, Pakistan's fiscal targets call for a primary surplus of 1.6% of GDP in FY26, rising to an underlying primary balance of 2% of GDP in FY27. Hitting those marks will require widening the revenue base and tightening control over public spending. The Fund said health, education, and social assistance allocations are also set to increase.

The country’s Federal Board of Revenue (FBR) has launched an internal overhaul to improve tax collection and enforcement. Changes underway include tougher audit procedures, a broader rollout of electronic invoicing, and closer monitoring of production activity.

A newly created Tax Policy Office has been tasked with drafting a longer-term reform roadmap aimed at keeping the policy environment stable without sacrificing revenue.

Similarly, the State Bank of Pakistan (SBP) has signaled it will hold policy rates at elevated levels for as long as needed to keep inflation within its official band. The IMF said the local currency should be allowed to move freely in response to external pressures. A market-determined exchange rate, the Fund said, remains the country's first line of defense against balance of payments stress, particularly given potential fallout from the Middle East conflict.

Pakistan's power sector remains a central focus of the program. Authorities have committed to closing the gap between the actual cost of electricity and what consumers are charged. The IMF said this structural imbalance is the root cause of the country's persistent circular debt problem.

The Fund reported that Pakistan authorities are also working to strengthen the Benazir Income Support Program, the country’s flagship federal social safety net. Measures include inflation-adjusted cash transfers, expanded coverage, and improved payment systems.

Under the RSF, Pakistan has moved ahead on reducing transport-related emissions and building regulatory infrastructure to track and manage climate-related financial risks.

Upcoming commitments include reinforcing water infrastructure, improving accounting for climate-relevant public expenditure, and establishing a formal framework for financing disaster response.

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