The International Monetary Fund (IMF) and Pakistan have made significant progress in discussions on the first review of the Extended Fund Facility (EFF) and a potential new Resilience and Sustainability Facility (RSF), but a staff-level agreement (SLA) has not yet been reached. The IMF team visited Pakistan from 24 February to 14 March 2025, and discussions will now continue virtually in the coming days, according to an IMF statement.
The review covered fiscal consolidation, monetary policy, energy sector reforms, and structural improvements. The RSF discussions focused on climate reform agendas, which could be supported under a possible new IMF facility.
To meet IMF targets, the government has already introduced fiscal measures, including a Rs10/litre increase in the Petroleum Development Levy (PDL) on petrol and diesel and an additional Rs791/mmbtu grid levy on captive power generation. The increase in PDL alone is expected to generate Rs14-15 billion in additional monthly revenue, aiding the government’s target of collecting Rs1.281 trillion in PDL for FY25. Meanwhile, the Federal Board of Revenue’s (FBR) revenue target has been revised down by Rs620 billion due to a downward revision in nominal GDP estimates.
Pakistan’s recent experience with the IMF suggests that securing an SLA does not immediately guarantee board approval. In May 2024, the IMF delayed the SLA until 12 July 2024, citing the need for further discussions and external financing assurances. The board approval took another two and a half months, finalising only on 24 September 2024, after Pakistan fulfilled prior conditions, including the FY25 budget, electricity tariff adjustments, and gas price revisions.
Similar delays have occurred in other regional IMF programmes. Bangladesh secured an SLA for its third review in December 2024, but three months later, board approval remains pending, likely due to the need for additional fiscal adjustments. Sri Lanka, too, had to implement prior actions such as tax law amendments before securing board approval in February 2025.
Pakistan may face a similar timeline, as the IMF could require further fiscal commitments before granting board approval. Analysts believe that finalising the SLA may take a few weeks, potentially extending to the presentation of the FY26 budget to ensure compliance with IMF fiscal targets. The State Bank of Pakistan has indicated that some foreign exchange inflows are linked to the IMF review, and further delays could put pressure on external accounts, forcing the government to rely on high-cost commercial borrowing to meet foreign exchange reserves targets. No official statement has been issued by the government regarding the delay, but discussions in the coming days are expected to focus on new tax measures, energy sector reforms, and progress on privatisation plans.
