IMF, Pakistan reach staff-level agreement on $1.2 billion funding under EFF and RSF

Islamabad (Web Desk): The International Monetary Fund (IMF) and the Government of Pakistan have finalized a staff-level agreement covering the second review of Pakistan’s Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF).

According to a press release issued by the IMF on Wednesday, the approval of this agreement by the IMF Executive Board will allow Pakistan to access about US$1.0 billion (SDR 760 million) through the EFF and nearly US$200 million (SDR 154 million) via the RSF, raising total disbursements under both programs to approximately US$3.3 billion.

“The IMF team has reached a staff-level agreement with the Pakistani authorities on the second review of the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and the first review of the 28-month arrangement under the Resilience and Sustainability Facility (RSF),” the statement read.

The Fund noted that the implementation of Pakistan’s economic program supported by the EFF has remained solid, adding that the authorities have committed to maintaining fiscal discipline, improving public finances, and providing relief to flood victims. The program also focuses on keeping inflation within the State Bank of Pakistan’s target range, ensuring the recovery of the energy sector, and continuing structural reforms.

The IMF underscored that progress on Pakistan’s climate-related reforms, backed by the RSF, is moving ahead, noting that the recent floods have once again demonstrated the importance of sustained and comprehensive policy implementation to reduce climate-related vulnerabilities.

The mission, led by Iva Petrova, held consultations from September 24 to October 8, 2025, in Karachi, Islamabad, and Washington D.C., as part of the second EFF and first RSF reviews.

“Supported by the EFF, Pakistan’s economic program is entrenching macroeconomic stability and rebuilding market confidence. The recovery remains on track, with the FY25 current account recording a surplus—the first in 14 years, the fiscal primary balance surpassing the program target, inflation remaining contained, external buffers strengthening, and financial conditions improving as sovereign spreads have narrowed significantly,” the press release stated.

However, the IMF highlighted that the devastating floods, which have impacted nearly seven million people, caused more than a thousand fatalities, and inflicted severe damage on homes, infrastructure, and farmlands, have adversely affected the economic outlook, particularly in the agriculture sector.

Consequently, the Fund revised Pakistan’s GDP growth projection for FY26 to around 3.25–3.50 percent. The disaster, it said, underscores Pakistan’s high exposure to natural calamities and climate-related risks, reinforcing the necessity of building long-term resilience.

“The authorities reaffirmed their commitment to the EFF- and RSF-supported programs, and to maintaining sound and prudent macroeconomic policies while advancing ongoing structural reforms,” the IMF further stated.

Among the policy priorities are the continuation of fiscal consolidation, enhancement of social protection programs, progress on fiscal and structural reforms, maintaining a tight and evidence-based monetary policy, restoring the viability of the energy sector, accelerating reform implementation, and fortifying climate resilience.

The Fund pointed out that both the recent floods and the 2022 disaster have highlighted the critical importance of Pakistan’s climate resilience strategy. It noted that policies supported through the RSF, in line with national commitments, are fostering progress in this direction, such as green mobility initiatives and measures to reduce emissions in transport.

Pakistan has also pledged to continue reforms aimed at strengthening climate data systems and financial risk management, improving water infrastructure, establishing a comprehensive disaster risk financing framework, and aligning energy reforms with national climate objectives.

“The IMF team wants to express its sympathy to those affected by the recent floods, and is grateful to the Pakistani authorities, private sector, and development partners for many fruitful discussions and their hospitality throughout this mission,” the statement concluded.