Washington, D.C., October 8 (ANI): Pakistan has secured another bailout lifeline after the International Monetary Fund (IMF) reached a staff-level agreement with Islamabad to unlock about $1.21 billion in additional financing, even as the lender warned that geopolitical tensions, high energy prices and trade disruptions continue to threaten the country’s economic recovery.
The arrangement encompasses the fourth review of Pakistan’s 37-month Extended Fund Facility (EFF), along with the third review of its 28-month Resilience and Sustainability Facility (RSF), as announced by the IMF on Wednesday.
Formal endorsement from the IMF Executive Board remains a prerequisite before any financial disbursements can be authorized.
Upon receiving final clearance, Islamabad will secure access to approximately $1 billion under the EFF and an additional $210 million through the RSF, bringing total cumulative disbursements under both financial mechanisms to roughly $5.7 billion.
An IMF delegation led by Iva Petrova conducted extensive consultations with Pakistani officials in Karachi and Islamabad from September 23 to October 7 as part of the country’s routine economic evaluation and performance reviews.
Pakistan’s economy grew by an estimated 3.6 percent in fiscal year 2026, hampered by high energy costs and persistent supply chain bottlenecks that weighed on broader economic activity.
Real gross domestic product growth stood at 4 percent during the first three quarters of the fiscal year.
Inflationary pressures, following a sharp peak in May, declined to approximately 10.3 percent by September, while the current account maintained a fragile balance, largely supported by strong remittances from Pakistanis overseas.
The country’s foreign exchange reserves rose to approximately $21.5 billion toward the end of September.
While the Washington-based lender noted that improvements in sovereign credit ratings and a tentative return to international debt markets signaled progress in policy credibility, it cautioned that the recovery remains vulnerable to external risks.
“Nevertheless, risks remain high, particularly from geopolitical tensions, volatile energy prices, tighter global financial conditions, and trade disruptions,” Petrova said.
The IMF instructed Pakistani authorities to maintain fiscal discipline and implement the FY27 budget framework, including an underlying primary surplus target equivalent to 2 percent of GDP.
It also called for major reforms in tax administration, including risk-based audits, automated digital invoicing systems and enhanced cross-verification using third-party databases to improve revenue collection.
Additionally, the Fund urged Islamabad to reform public financial management, overhaul government procurement procedures and streamline government cash operations to reduce borrowing costs and debt rollover risks.
Regarding social spending, the lender noted a nominal increase in health and education allocations from 2.2 percent of GDP in FY24 to 2.5 percent in FY26, with proposed spending of 2.8 percent in FY27.
While acknowledging expanded targeted welfare payments, the IMF called for the termination of the country’s fuel support scheme, citing its fiscal burden and limited scope.
The multilateral institution also instructed the State Bank of Pakistan to maintain a restrictive monetary policy stance until inflation is sustainably brought back within its official target range.
Reform of the energy sector remains a key priority, requiring tariff adjustments, improved operational efficiency, greater competition in electricity distribution and measures to address the continued accumulation of circular debt.
The IMF’s Extended Fund Facility provides financial assistance to countries undertaking economic reforms to address structural vulnerabilities and balance-of-payments crises, while the Resilience and Sustainability Facility provides longer-term financing to address climate-related vulnerabilities and structural challenges.
Pakistan continues to rely on repeated bailout programs to stabilize its foreign exchange reserves and address persistent fiscal and energy-sector challenges. (ANI)
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