Pakistan appears set to secure over $1 billion from the International Monetary Fund (IMF) by mid-October, despite falling short on some reform targets. Technical-level talks with the IMF have concluded, and policy-level discussions begin Monday. Officials expect the review to wrap up by October 9 or 10, possibly leading to disbursement of the third tranche under the $7 billion Extended Fund Facility.
The IMF has acknowledged improvements in Pakistan’s power sector, particularly in reducing circular debt and boosting collections. However, concerns remain over weak federal tax collection and missed budget surplus targets by provinces—especially Punjab and Sindh. The Federal Board of Revenue (FBR) fell short of revenue goals by over Rs 200 billion in the first quarter of FY26.
Read more: Pakistan Likely to Secure $1bn IMF Tranche Despite Revenue Slippages
Despite internal shortfalls, Pakistan benefits from a favorable international political environment. Major IMF voting members are reportedly backing Pakistan. Provinces face IMF pressure to improve financial discipline and deliver promised surpluses. But recent floods have impacted agricultural tax collections and delayed enforcement of new tax laws in provinces like Punjab and Sindh.
A key sticking point is the IMF’s rejection of tax exemptions for old oil refineries, risking nearly $6 billion in planned investment. The IMF argues that such exemptions violate the terms of the $1.4 billion Resilience and Sustainability Facility (RSF), aimed at addressing climate-related goals. The government insists the policy was environmentally necessary, calling the rejection a misunderstanding.
While Pakistan has met most quantitative targets by June 2025, it lags on structural reforms and indicative goals. Talks are also underway to address circular debt in the gas sector and improve governance of state-owned enterprises. Both sides must now align on a future roadmap to ensure continuity of funding under the EFF and RSF programs.