IMF Mission Begins Pakistan Loan Review: $1bn Disbursement on the Line
ISLAMABAD – An International Monetary Fund (IMF) mission is currently engaged in discussions with Pakistani authorities regarding the country’s economic reform program, a critical step towards securing the next tranche of funding under a $7 billion Extended Financing Facility (EFF) and a $1.1 billion Resilience and Sustainability Facility (RSF). The mission, led by Iva Petrova, began technical-level talks with the State Bank of Pakistan (SBP) in Karachi on Wednesday, .
The ongoing review, expected to conclude on , will assess Pakistan’s performance through the end of December 2025. Policy discussions with federal and provincial governments are scheduled to begin on Monday, with a comprehensive review led by Finance Minister Muhammad Aurangzeb. The government has expressed confidence in a successful review, citing strong performance in revenue collection by the Federal Board of Revenue (FBR).
The successful completion of this review is crucial for Pakistan, potentially unlocking approximately $1 billion under the EFF and an additional $200 million under the RSF by the end of April. This would bring total disbursements under the two arrangements to approximately $3.3 billion, according to the IMF.
Rollover of UAE Deposits a Key Focus
A significant aspect of the discussions centers on the rollover of a $2 billion deposit from the United Arab Emirates (UAE). This deposit, typically renewed annually, expired over two months ago and has been subject to short-term extensions. Both Finance Minister Aurangzeb and Deputy Prime Minister and Foreign Minister Ishaq Dar have publicly assured that talks with the UAE government are progressing positively, with expectations of an automatic rollover. Pakistan relies heavily on these rollovers – totaling $12.5 billion from China, Saudi Arabia, and the UAE – to meet its external financing needs under the EFF.
Areas of Scrutiny and Progress
The IMF review will delve into several key areas, including fiscal performance, inflation, and foreign exchange reserves. Pakistan has largely met quantitative performance criteria, with gross reserves standing at $14.5 billion at the end of fiscal year 2025, an increase from $9.4 billion the previous year. The central bank’s net domestic assets are currently estimated at around Rs12.5-13.5 trillion, falling within the targets set by the IMF.
However, the review will also scrutinize areas where Pakistan is lagging, particularly in indicative targets and structural benchmarks. The power sector, marked by recent policy volatility regarding industrial and residential tariffs, will be under close examination, although circular debt remains within acceptable limits. Procurement and accountability agencies will also face scrutiny regarding their independence, capacity, and performance.
A recent decision by the Federal Constitutional Court regarding the super tax is expected to alleviate some revenue shortfall concerns. The IMF noted last week that Pakistan’s policy efforts under the EFF have “helped stabilise the economy and rebuild confidence,” despite a challenging global environment and the impact of recent floods.
Budget Preparations and Provincial Finances
The IMF mission’s discussions will extend beyond a review of past performance to include forward-looking preparations for the upcoming budget. This involves assessing provincial finances, including potential reforms to agricultural income tax, and addressing governance-related challenges that contribute to significant economic losses. The review will encompass both current and future provincial performance.
Macroeconomic Indicators and Future Implementation
The IMF will review all key macroeconomic indicators for the current quarter. While Pakistan is expected to meet most of the seven quantitative performance indicators, net international reserves are projected to be slightly below the agreed benchmarks of $7 billion for September 2025 and $6 billion for December 2025. The successful navigation of these benchmarks, alongside adherence to structural benchmarks, will be critical for the continued implementation of the EFF and RSF programs.
The biannual nature of the reviews necessitates agreement between Pakistan and the IMF on both past performance and future implementation plans. The current review is particularly significant as it covers performance through December 2025 and sets the stage for the next phase of economic reforms.