Islamabad-(Mudassar Iqbal)-The International Monetary Fund (IMF) and Pakistani authorities have reached a staff-level agreement on the first review of Pakistan’s Extended Fund Facility (EFF) and a new arrangement under the Resilience and Sustainability Facility (RSF). This agreement follows a series of discussions held from February 24 to March 14, 2025, in Karachi, Islamabad, and virtual meetings, led by Nathan Porter, IMF’s Mission Chief to Pakistan.
The agreement outlines key policy goals, including sustainable public finances, reduced inflation, rebuilt external buffers, and removal of economic distortions to spur private sector-led growth. Pakistan aims to achieve an underlying general government primary surplus of 1% of GDP in FY25 and sustain consolidation in the FY26 budget.
The IMF team praised Pakistan’s progress in restoring macroeconomic stability and expressed gratitude for the hospitality and fruitful discussions with Pakistani authorities, the private sector, and development partners.
The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF), and on a new 28-month arrangement under the IMF’s RSF with total access over the 28 months of around $1.3 billion (SDR 1 billion). The staff-level agreement is subject to approval of the IMF’s Executive Board. Upon approval, Pakistan will have access to about US$1.0 billion (SDR 760 million) under the EFF, bringing total disbursements under the program to about US$2.0 billion.
IMF Allows Pakistan to Lower Property Tax
Over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment. While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger. While economic activity is expected to steadily improve, downside risks also remain elevated. Potential macroeconomic policy slippages — driven by pressures to ease policies — along with geopolitical shocks to commodity prices, tightening global financial conditions, or rising protectionism could undermine the hard-won macroeconomic stability.
IMF rejects Pakistan’s request for tax reduction on property transactions
Additionally, climate-related risks continue to pose a significant challenge for Pakistan, creating a need to build resilience including through adaptation measures.
In this regard, it is critical to stay the course and entrench the progress achieved over the past one and a half years, building resilience by further strengthening public finances, ensuring price stability, rebuilding external buffers and eliminating distortions in support of stronger, inclusive and sustained private sector-led growth.
The authorities reiterated their commitment to the EFF-supported program and plan to supplement their efforts by advancing reforms under the RSF-supported program aiming to address long standing economic vulnerabilities to climate shocks and build resilience.
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