Pakistan is likely to receive around $1.2 billion from the International Monetary Fund (IMF) after both sides reached a staff-level agreement, giving the country some financial relief amid an uncertain global environment. At the same time, it has warned that tensions in the Middle East could add pressure on inflation, economic growth and Pakistan’s external stability.
The understanding includes the third review of the Extended Fund Facility and the second review under the Resilience and Sustainability Facility. Once the IMF’s Executive Board signs off, total disbursements under these programmes will rise to nearly $4.5 billion.
The IMF has made it clear that the agreement is tied to strict policy commitments. Pakistani officials have assured the Fund they will stick to fiscal discipline, despite growing external challenges. The central bank has also indicated it is ready to tighten monetary policy if inflation moves beyond the target range.
This stance is more cautious than the government’s projections. The Finance Ministry has downplayed the impact of the Middle East conflict, expecting only limited effects on inflation and growth, even with higher oil prices.
According to IMF Mission Chief Iva Petrova, recent policy steps have helped stabilise the economy and restore confidence, but risks from the global environment remain. Rising energy costs and tighter financial conditions could push inflation higher and slow down economic activity.
Notably, the IMF has kept its fiscal targets unchanged. Pakistan is still required to achieve a primary surplus of 1.6% of GDP in the coming fiscal year, despite concerns over weak tax collection. The Fund is also pressing for stronger revenue efforts, including widening the tax net and improving enforcement through reforms within the Federal Board of Revenue.
On expenditures, authorities have been advised to maintain discipline and work more closely with provinces, especially in sharing the cost of subsidies. Fuel subsidies alone have already exceeded Rs125 billion, raising questions about their long-term sustainability.
The IMF has also cautioned against broad energy subsidies, describing them as expensive and inefficient. Instead, it has supported targeted assistance through programmes such as the Benazir Income Support Programme, which is being expanded to help low-income households cope with rising prices.
