IMF approves third EFF review for Pakistan, releases about $1.3bn plus RSF funding

• Proposes Rs430bn new budgetary measures• Suggests 18pc hike in petroleum levy target• Asks provinces to mobilise extra Rs430bn• Links power tariff relief to BISP• Sees economic growth at 3.5pc• Estimates average inflation at 8.4pc• Seeks hike in BISP payment to Rs18,000 with 40pc population vulnerable ISLAMABAD: With Rs430 billion in new budgetary measures and an 18 per cent higher petroleum levy, the International Monetary Fund (IMF) has targeted Pakistan’s federal revenues at Rs17.145 trillion for 2026-27, along with a series of administrative and policy measures committed by the government for the federal and provincial budgets to be passed by the parliament. In its staff report on completion of third review of $7bn Extended Fund Facility (EFF) and second review of $1.4bn Resilience and Sustainability Facility (RSF), the fund has projected total federal revenues for FY27 at Rs17.144tr — over Rs2.03tr higher than the current fiscal year, up 13.5pc. The report showed that Pakistan had to commit and deliver three major prior actions to make up for slippages on programme benchmarks before the IMF’s executive board finally approved the disbursement of $1.3bn under both facilities. These included Rs136bn lower grants to the provinces, Rs322bn in recoveries following favourable court decisions relating to super tax, and full pass-on of fuel prices after the government’s initial hesitation following the US-Iran war. This was despite the fact that authorities maintained that, besides those living in absolute poverty and getting social income supports, 40pc of the population was now facing vulnerability. The BISP support would be increased to Rs18,000 in the coming budget, up from Rs14,500 per family at present, the two sides have agreed. Almost matching commitments worth Rs430bn have been made by the four provinces for additional provincial revenue mobilisation next year. This will take total provincial revenues to Rs1.95tr next year, up from Rs1.264tr expected in FY26. The provinces have committed to deliver these targets through improved collection from general sales tax on services and agricultural income tax. They would then surrender 1.4pc of GDP-equivalent cash surplus — 0.3pc higher than in FY26 — to the Centre. This would work out to be close to Rs2tr against Rs1.46tr provincial surplus in the current year. The collection target for the Federal Board of Revenue (FBR) has been projected at Rs15.264tr for FY27, about 13.7pc or Rs1.836tr higher than the current fiscal year. Under this annual projection, FBR’s half-year target ending December 2026 has been separately set at Rs7.022tr. This means the IMF expects about 12pc organic revenue growth, based on its estimate of 8.4pc average inflation and 3.5pc economic growth, with the remainder coming from budgetary, administrative, and digital reforms and enforcement measures. This would be supported by about Rs95bn committed by the government to generate through tax audits in FY27, Rs50bn through monitoring and improvement calculation of liabilities in sales tax and about Rs50bn improved recoveries in tax gap from sugar, cement, tobacco and fertiliser sectors. The fund has projected the Rs1.468tr petroleum levy target for the current fiscal year to be surpassed by almost Rs80bn to Rs1.55tr. It has set Rs1.73tr petroleum levy target for FY27 — 18pc higher than budgeted for FY26. That means the government and the fund have already reached an understanding to perhaps raise the average levy rate to Rs100 per litre for next year, as the country has never had such high consumption growth. An IMF staff mission is currently in Pakistan to fine-tune budgetary proposals around these estimates before the budget 2026-27 is presented to the cabinet and the parliament early next month. Defence expenditure is estimated to be Rs100bn higher next year at Rs2.665tr compared to Rs2.564tr this year. The Public Sector Development Programme for next year is projected at Rs986bn compared to Rs873bn in the current year, notwithstanding major announcements by the government in the budget. Provincial development budgets are estimated at Rs2.5tr next year compared to Rs2.1tr in the current fiscal year. Interest payments for FY27 are projected at Rs7.8tr, up from Rs7.3tr this year. The IMF has estimated the next year’s external financing needs at $21.2bn and projects available financing at $21.9tr from bilateral, multilateral and capital market lenders. As part of next year’s budget, Pakistan has also committed to increasing the combined expenditure of the federal and provincial governments by 0.2pc of GDP to a total of Rs4.227tr, and to digitalising all federal and provincial government payments by June 2027. Another commitment pertains to timely tariff adjustments according to their biannual and annual schedules, respectively, in the gas and power sectors, to ensure full cost recovery in the wake of the regional security crisis and supply disruptions. As a result, tariff subsidies for low-income categories would be provided through BISP, based on the national socioeconomic registry (NSER) surveys, rather than the current billing mechanism. As a result, power sector subsidies have been capped at Rs830bn, or 0.6pc of GDP, for next year, more than Rs200bn lower than the Rs1.036tr in FY26. The government has also committed to settling disputes with K-Electric by September this year and to reducing circular debt flow by Rs300bn to ensure net zero flow at the close of FY26 and FY27. The government has also committed to adopting a national sugar policy by the end of June 2026 to fully exit commodity operations at both the federal and provincial levels. The new automobile policy would be cleared from the IMF before its approval by the federal cabinet by the end of June, and the National Accountability Bureau’s autonomy would be legislated by the end of January 2027. The government will identify 10 top corruption-prone institutions by the end of this year for detailed analysis and audit. The provincial anti-corruption agencies would also be strengthened. The government has also given an undertaking not to introduce new incentives for special economic zones, export processing zones, and special technology zones, and to phase out all such incentives by 2035 to provide a level playing field for all. The government has also committed to reducing government intervention in the wheat and sugar markets to remove distortions and support private investment, productivity, and efficiency. These changes will also strengthen price discovery, which is particularly important amid elevated international food price volatility. Governance arrangements for strategic wheat reserves would be improved by conducting procurement through the private sector at prices aligned with international markets and by limiting releases to cases of a declared emergency. Published in Dawn, May 16th, 2026

• Aurangzeb, mission discusses revenue targets, tax measures, reforms, fiscal strategy• Lender stresses need for fiscal discipline• Minister heads to China for Panda bond launch ISLAMA­BAD / KARACHI: Pakistan has received fresh inflows of $1.3 billion from the Interna­tional Mon­e­t­ary Fund (IMF), which has pushed the State Bank of Pakistan’s (SBP) foreign exchange reserves above $17bn and closer to the central bank’s target of $18bn. Meanwhile, a visiting IMF mission on Wednesday began a pre-budget review of Pakistan’s economy, focusing on revenue collection targets, proposed tax measures, reforms and the fiscal strategy for 2026-27. The Fund approved special drawing rights (SDR) worth 760 million for Pakistan under the Extended Fund Facility (EFF) and SDR 154 million under the Resilience and Sustainability Facility (RSF). “The SBP has received SDR 914m (equivalent to about $1.3bn) under the EFF and RSF in value dated May 12, 2026, from the IMF,” the central bank said on Wednesday. The SBP’s foreign exch­ange reserves have become highly critical for the economy as they help build confidence among importers and exporters, meet the trade deficit, stabilise the exchange rate and support debt servicing payments. In its recent half-yearly report, the SBP revealed it had been buying dollars from the inter-bank market to improve reserves. During the last three years, the central bank purchased about $27bn from the currency market. The SBP’s foreign exchange reserves stood at $15.85bn on April 30. With the inflow of $1.3bn from the IMF, reserves have risen to about $17.15bn. The SBP’s target for FY26 is $18bn, which could now be achieved with purchases of less than $1bn from the currency market. Pakistan, however, has struggled to attract foreign investment, which has been declining for years. Foreign direct investment fell 27 per cent during July-March FY26. According to the SBP, global FDI flows increased 14pc to $1.6 trillion in 2025, primarily driven by the European Union, while developing economies witnessed disinvestment. Moreover, the secondary income account recorded a higher surplus, largely reflecting robust workers’ remittances that helped finance a major part of the combined deficit in trade in goods and services and the primary income account. Pre-budget review The review began in Islamabad, during which detailed technical discussions is expected on the budget framework and government proposals before subsequent approval under the programme. The IMF team, led by Mission Chief Iva Petrova, is expected to remain in Pakistan for about six working days, likely until May 20. According to an official statement, Finance Minister Muhammad Aurangzeb briefed the IMF delegation on Pakistan’s macroeconomic outlook, fiscal strategy, reform priorities and the government’s efforts to ensure sustainable economic stability and long-term growth. The discussions focused on macroeconomic stabilisation efforts, preparations for the upcoming federal budget and reforms aimed at strengthening fiscal and external sustainability while supporting economic growth. Both sides exchanged views on maintaining reform momentum, preserving macroeconomic stability and advancing structural reforms to promote investment, productivity and export-led growth. Aurangzeb highlighted positive trends in remittances and exports, reflecting growing resilience in the economy and gradually strengthening macroeconomic fundamentals. He said the government remained mindful of structural economic challenges, particularly external liabilities and the need to accelerate sustainable, export-led growth. The minister reiterated the government’s commitment to reforms aimed at strengthening macroeconomic stability without compromising long-term growth prospects. He also briefed the IMF mission on Pakistan’s continued engagement with international development partners, including ongoing economic cooperation initiatives with China and efforts to mobilise long-term investment aligned with the country’s strategic priorities. Petrova acknowledged Pakistan’s progress in maintaining macroeconomic stability despite a challenging global and regional environment. The IMF mission appreciated the government’s continued commitment to prudent economic management and reform implementation. The IMF team emphasised the importance of sustaining reform momentum, maintaining fiscal discipline and advancing structural reforms to support durable and inclusive economic growth. The mission reaffirmed its commitment to continued engagement and constructive cooperation with the government of Pakistan in support of the country’s economic reform programme and long-term resilience. Meeting with US official Aurangzeb also met S. Paul Kapur, the US assistant secretary at the Bureau of South and Central Asian Affairs. Mr Kapur was accompanied by US Chargé d’Affaires Natalie A. Baker. The meeting, held at the Finance Division, focused on Pakistan-US economic cooperation, investment opportunities, trade relations and the government’s reform agenda aimed at strengthening macroeconomic stability and improving the business environment. According to an official statement, both sides exchanged views on enhancing bilateral economic engagement and expanding cooperation in areas of mutual interest. The finance minister briefed the US official on Pakistan’s economic performance during the current fiscal year and emphasised the government’s focus on attracting long-term investment, particularly in energy, mining, infrastructure, technology and digital finance. Panda bond launch Later on Wednesday night, Aurangzeb left for China to participate in the issuance ceremony of Pakistan’s inaugural Panda bond in Beijing. According to a finance ministry statement, the overall Panda bond programme has been set at $1bn, while the inaugural issuance will amount to the equivalent of $250m. The issuance is supported by the Asian Development Bank and the Asian Infrastructure Investment Bank. During his visit to China, the finance minister is also expected to hold meetings with investors, financial institutions and senior Chinese officials to discuss bilateral cooperation and investment. Published in Dawn, May 14th, 2026

The State Bank of Pakistan (SBP) said on Wednesday that it had recieved $1.3 billion from the International Monetary Fund (IMF). “The IMF Executive Board completed the third review under the Extended Fund Facility (EFF) in its meeting held on May 8 and approved the disbursement of SDR 760 million for Pakistan. Furthermore, the IMF Executive Board has also approved the disbursement of the second tranche of SDR 154 million under the Resilience and Sustainability Facility (RSF),” the central bank said on the social media platform X. “Accordingly, SBP has received SDR 914 million (equivalent to about US$ 1.3 billion) under the EFF and RSF in value May 12 from the IMF,” it said. It said that the amount would be reflected in the country’s foreign exchange reserves for the week ending on May 15. Last week, the international money lender had approved the latest review of Pakistan’s reform programme. The decision paved the way for disbursements of about $1.1bn from the EFF and $220m from the RSF, bringing total payouts under the two arrangements to roughly $4.8bn. While the funding provides crucial short-term support, the IMF’s statement emphasised an evolving and uncertain outlook, cautioning that Pakistan’s recent gains are exposed to heightened global volatility, particularly spillovers from the conflict in the Middle East. “The authorities’ strong implementation, despite the Middle East war, has maintained economic stability and improved financing and external conditions,” the Fund noted in its statement. However, it cautioned that the shocks emanating from the Middle East war underlined the continued importance of maintaining strong policies to continue building resilience and of moving ahead with structural reforms to achieve sustainable long-term growth. IMF Deputy Managing Director and Acting Chair Nigel Clarke reinforced this cautionary tone, stressing the need for both discipline and accelerated reforms. “Amid a more challenging and highly uncertain external environment since the onset of the war in the Middle East, Pakistan needs to maintain strong macroeconomic policies while accelerating reform efforts, which are critical to managing further shocks and fostering higher sustainable medium-term growth,” he said. Meanwhile, the central bank on Tuesday said that while macroeconomic stability had improved in the first half of fiscal year 2026, the war in the Middle East posed risks to the economic outlook amid heightened uncertainty. In its half-year report, the bank said supply chain disruptions were likely to affect the inflation trajectory, external trade and remittance flows and the country’s economic activity.

WASHINGTON: The International Monetary Fund’s (IMF) Executive Board on Friday approved the latest review of Pakistan’s reform programme, paving the way for the release of $1.32 billion in financing under the ongoing arrangements. In Islamabad, Finance Minister Muhammad Aurangzeb also confirmed the approval, saying the decision reflects Pakistan’s continued progress on difficult but necessary economic reforms. The approval was given at a meeting of the IMF Executive Board in Washington, DC, reflecting its continued support for Pakistan’s ongoing economic reform programme. The approval allows Pakistan to draw about $1.1 billion under the EFF and about $220 million under the RSF, bringing total disbursements under the two arrangements to roughly $4.8 billion. The IMF said the approval comes after Pakistan successfully met key structural benchmarks, including tax policy measures and adjustments in energy pricing, aimed at strengthening fiscal discipline and improving macroeconomic stability. In its statement, the IMF said Pakistan’s policy implementation under the programme had remained strong and had helped preserve stability despite a more uncertain global environment. “Pakistan’s strong programme implementation under the EFF arrangement has continued, which has supported macroeconomic stability and the rebuilding of fiscal and foreign exchange buffers,” the Fund said. At the same time, the IMF said external conditions had become more difficult due to geopolitical tensions. “The shocks emanating from the Middle East war underline the continued importance of maintaining strong policies to continue building resilience and of moving ahead with structural reforms to achieve sustainable long-term growth,” it added. The Fund said Pakistan’s economic performance had shown improvement under the programme. It noted that GDP growth had accelerated, inflation had remained contained overall despite recent pressures, and the current account had been broadly balanced in the first nine months of FY26. Inflation, however, had risen due to the pass-through of higher global commodity prices, particularly into domestic energy tariffs. The IMF noted that this reflected necessary adjustments in administered prices aimed at restoring energy-sector viability. Foreign exchange reserves also improved during the review period, rising to $16 billion at end-December 2025, compared with $14.5 billion at end-June 2025. The Fund said reserves were expected to continue rebuilding over the medium term, supported by programme financing and policy discipline. Following the Executive Board discussion, IMF Deputy Managing Director and Acting Chair Nigel Clarke said Pakistan needed to maintain tight macroeconomic policies while accelerating reforms to withstand external shocks and sustain growth. “Amid a more challenging and highly uncertain external environment since the onset of the war in the Middle East, Pakistan needs to maintain strong macroeconomic policies while accelerating reform efforts, which are critical to managing further shocks and fostering higher sustainable medium-term growth,” Clarke said. He added that continued programme implementation had supported stability. “Pakistan’s strong programme implementation under the EFF arrangement has continued, which has supported macroeconomic stability and the rebuilding of fiscal and foreign exchange buffers,” he said. The IMF emphasised that fiscal policy should remain focused on gradual consolidation. It said this approach would strengthen resilience and credibility while helping reduce vulnerabilities. At the same time, it stressed that fiscal adjustment should be supported by stronger revenue mobilisation, including broadening the tax base and improving compliance. “Gradual fiscal consolidation remains appropriate to strengthen resilience and should be supported by continued efforts to boost revenue mobilisation— through broadening the tax net and improving compliance — and strengthen spending efficiency and public financial management,” Clarke said. The Fund said improved fiscal discipline would also create space for higher social spending and investment in human capital. It specifically highlighted the importance of maintaining and expanding social assistance programmes while increasing productive public investment and addressing distortions in tax policy. On monetary policy, the IMF said the State Bank of Pakistan had acted proactively to maintain a tight stance aimed at anchoring inflation expectations. It urged continued vigilance against second-round effects on prices, wages, and expectations. The IMF also reiterated that exchange-rate flexibility should remain the primary shock absorber for the economy as Pakistan rebuilds reserves. It encouraged continued development of the foreign exchange market and supported a carefully sequenced medium-term liberalisation of FX regulations. “Exchange rate flexibility should be the main shock absorber, particularly given the need to continue rebuilding reserves,” Clarke said. The Fund also highlighted risks in the financial sector. It called for continued efforts to ensure that banks remain adequately capitalised and urged authorities to address capital shortfalls in microfinance institutions, while maintaining broader financial stability. Energy sector reforms remained a central pillar of the programme. The IMF said recent improvements in the sector needed to be sustained through cost-reflective pricing of electricity, gas, and fuel, alongside targeted support for vulnerable consumers. “In an environment of high and volatile commodity prices, recent improvements in energy sector finances need to be sustained by keeping domestic fuel, electricity, and gas prices in line with costs, while protecting the most vulnerable consumers with targeted support,” Clarke said. The Fund also stressed that continued reforms were essential to reduce inefficiencies, lower costs, and improve competitiveness. Energy sector reforms were also linked to reducing fiscal pressures and containing circular debt accumulation. On governance and structural reforms, the IMF urged Pakistan to continue implementing economic governance reforms aimed at strengthening anti-corruption institutions. It also called for progress in completing state-owned enterprise restructuring and privatisation, and for improvements in the business environment through regulatory simplification and removal of distortions. “Efforts should continue to deliver on the Economic Governance Reform actions aimed at bolstering anti-corruption institutions,” Clarke said. “Other priorities include completing SOE reforms and privatisation, and enhancing the business environment by eliminating distortions and unnecessary regulations.” According to programme details, Pakistan’s reform path going forward will emphasise sustaining a primary budget surplus of around 2 per cent of GDP, broadening the tax base, and improving compliance in previously under-taxed sectors, including retail and agriculture. Authorities are also expected to pursue additional revenue measures to support a tax-to-GDP increase over the medium term. Energy sector reforms remain central to the IMF framework, with commitments to regular and predictable tariff adjustments in electricity and gas to reduce circular debt and improve financial viability in the sector. The programme also envisages continued restructuring and privatisation efforts involving selected state-owned enterprises, aimed at reducing fiscal burdens and improving efficiency. Officials said the latest review is expected to help support Pakistan’s external position, with inflows contributing to a further strengthening of foreign exchange reserves in the coming weeks. An IMF mission is scheduled to visit Islamabad on May 15 to engage with authorities on the next federal budget framework and review progress on structural reforms. Pakistan is currently under a $7 billion, 37-month IMF programme, aimed at stabilising the economy through fiscal discipline, structural reforms, and measures to support long-term growth. Analysts say the approval provides near-term stability for financial markets while reinforcing the government’s commitment to its reform agenda under the multi-year programme, which remains focused on long-term fiscal and external sustainability.

IMF has approved $1.32 billion for Pakistan after completing a programme review, according to Reuters and IMF statements. The funds come under EFF and RSF facilities, taking total support to $4.8 billion. Disbursement is tied to continued reforms on fiscal discipline and stability

WASHINGTON: The International Monetary Fund’s (IMF) Executive Board on Friday approved the latest review of Pakistan’s reform programme, paving the way for the release of $1.2 billion in financing under the ongoing arrangements. In Islamabad, Finance Minister Muhammad Aurangzeb also confirmed the approval, saying the decision reflects Pakistan’s continued progress on difficult but necessary economic reforms. The approval was given at a meeting of the IMF Executive Board in Washington, DC, reflecting its continued support for Pakistan’s ongoing economic reform programme. The disbursement includes around $1 billion under the Extended Fund Facility (EFF) and approximately $200 million under the Resilience and Sustainability Facility (RSF). With this tranche, total disbursements under the current programme have risen to about $4.5 billion. The IMF said the approval comes after Pakistan successfully met key structural benchmarks, including tax policy measures and adjustments in energy pricing, aimed at strengthening fiscal discipline and improving macroeconomic stability. Officials said the programme continues to focus on rebuilding foreign exchange reserves, containing inflationary pressures, and maintaining a tighter fiscal stance amid ongoing external and regional economic challenges. According to programme details, Pakistan’s reform path going forward will emphasise sustaining a primary budget surplus of around 2 per cent of GDP, broadening the tax base, and improving compliance in previously under-taxed sectors, including retail and agriculture. Authorities are also expected to pursue additional revenue measures to support a tax-to-GDP increase over the medium term. Energy sector reforms remain central to the IMF framework, with commitments to regular and predictable tariff adjustments in electricity and gas to reduce circular debt and improve financial viability in the sector. The programme also envisages continued restructuring and privatisation efforts involving selected state-owned enterprises, aimed at reducing fiscal burdens and improving efficiency. Officials said the latest review is expected to help support Pakistan’s external position, with inflows contributing to a further strengthening of foreign exchange reserves in the coming weeks. The IMF has also indicated that Pakistan will continue to maintain a tight, data-driven monetary policy stance to anchor inflation expectations and preserve macroeconomic stability. Looking ahead, an IMF mission is scheduled to visit Islamabad on May 15 to engage with authorities on the next federal budget framework and review progress on structural reforms. Pakistan is currently under a $7 billion, 37-month IMF programme, aimed at stabilising the economy through fiscal discipline, structural reforms, and measures to support long-term growth. Analysts say the approval provides near-term stability for financial markets while reinforcing the government’s commitment to its reform agenda under the multi-year programme, which remains focused on long-term fiscal and external sustainability.