ISLAMABAD: The IMF Executive Board on Friday approved the third review and release of the fourth tranche under the Extended Fund Facility (EFF) and second tranche under the Resilience and Sustainable Facility (RSF) to disburse $1.2 billion for Pakistan.
The board met in Washington, DC, to consider Pakistan’s request for approval of the fourth tranche of $1 billion under the EFF program and the second tranche of $200 million under RSF.
The loan disbursement of $1.2 billion will be made next week, building up the country’s foreign exchange reserves.
The IMF review mission — led by Ms. Iva Petrova — held discussions with the Pakistani authorities from February 25 to March 11 on the third review of EFF and the second review of RSF and, later on, both sides struck a staff-level agreement.
The IMF considered that the program implementation under the EFF remained broadly aligned with the authorities’ commitments through end-February 2026 and declared that Pakistan had made considerable progress.
Considerable progress was made on policies ahead, including on sustaining the fiscal consolidation to strengthen public finances; maintaining a sufficiently tight monetary policy to ensure inflation remains durably within the State Bank of Pakistan’s target range; and advancing reforms to improve the viability of the energy sector.
The SBP raised the policy by 100 basis points, jacking it up from 10.5 percent to 11.5 percent in line with the IMF demand.
Pakistan also paid attention to deepening structural reforms, given the authorities’ emphasis on accelerating growth, alongside efforts to strengthen social protection and rebuild health and education spending. These discussions are ongoing.
The increased regional conflict in the wake of Gulf War has increased inflationary pressure on the country, doubling the CPI-based inflation.
However, the authorities are projecting the GDP growth rate of over 4 percent, keeping in view the improved performance of Large Scale Manufacturing (LSM) in the first nine months of the current fiscal year.
The fuel price surge in the international market forced the government to pass the burden on to the consumers. The FBR has so far faced a revenue shortfall of Rs684 billion in achieving the desired tax collection target in the first 10 months (July-April) period of the current fiscal year.
The FBR will have to collect Rs3,718 billion in the remaining two months (May and June) to materialise the revised target of Rs13,979 billion by the end of June 2026.
The government had envisaged tax collection target of Rs14,130 billion on eve of the budget 2025-26 with the approval of parliament but later revised the target downward to Rs13,979 billion.
Keeping in view slippages on the FBR front, the government has come up with an alternative option to jack up non-tax revenue in the shape of petroleum levy; the levy was jacked up to achieve the agreed target with the IMF on budget deficit and clinch the primary balance of 2.4 percent of GDP by June 30.
