IMF Kicks Off Formal Review of Pakistan’s Loans
An IMF mission has arrived in Islamabad to begin formal discussions on Pakistan’s $7 billion Extended Fund Facility EFF and the $1.1 billion Resilience and Sustainability Facility RSF. The two week review aims to assess progress against targets set under the program through December 2025 and to map corrective steps where needed. Officials say the talks will also explore how climate and energy objectives fit within the broader stabilization plan as the economy navigates a difficult period.
What the Review Covers
The discussions, led by the IMF mission alongside Pakistan’s finance minister and central bank governor, will examine macroeconomic performance, policy measures, and the status of structural reforms. The EFF provides balance of payments support while the RSF is designed to bolster climate resilience and long run sustainability. Officials expect a candid assessment of what has worked and what has not, with an emphasis on restoring revenue collection and maintaining fiscal discipline while preserving growth momentum.
Revenue Shortfalls and Power Sector Progress
Pakistan’s performance under the program through June 2025 has been uneven. Revenue collection lagged by about Rs 1.2 trillion in the last fiscal year, roughly 1 percent of GDP, with the early months of the current year showing a similar shortfall. By contrast, power sector targets for end June were achieved, underscoring a mixed policy outcome where some areas meet goals while others miss them. The IMF mission will probe the drivers of these gaps and discuss steps to strengthen tax administration, broaden the tax base, and shore up fiscal buffers without choking growth.
Refinery Upgrade and Emissions Policy
Pakistan has sought IMF support to accelerate a long delayed brownfield petroleum refinery upgrade estimated at about $6 billion. Officials argue the upgrade would enable production of petroleum products that meet European standards with lower carbon and sulphur emissions, aligning with the RSF climate objectives. The mission will assess how this investment could be financed within the program’s framework and how it fits with energy security and import substitution plans. The discussions will also consider how faster implementation of the refinery project could help attract private capital while meeting environmental targets.
Forward-Looking Measures and Targets
Beyond immediate fixes, the IMF talks will emphasize faster execution of remaining targets and the design of policy packages to support credible budgeting and debt sustainability. Prospects for tax reforms, subsidy rationalization, energy tariff adjustments, and measures to improve exchange rate flexibility will be on the agenda. The mission will weigh the tradeoffs between stabilizing the balance of payments and preserving room for growth investments in infrastructure and industry. The goal is to set a credible path that delivers macro stability and builds investor confidence.
Why This Matters for Pakistan’s Economy
The review comes at a critical time as Pakistan seeks to reconcile debt management with growth, while also advancing climate and energy priorities. A positive assessment could unlock continued IMF financing and signal to markets that Pakistan remains committed to reform. Even as key targets are being met in areas like the energy sector, persistent revenue gaps and implementation hurdles risk undermining program credibility. The discussions will shape the pace of reforms, influence risk assessments, and potentially affect funding decisions and investor sentiment in the near term.
Looking Forward
As the two week mission proceeds, the emphasis will be on concrete corrective measures and the speed of their deployment. If the authorities can articulate credible reforms and demonstrate progress toward the December 2025 biannual targets, Pakistan could preserve access to financing and maintain a path toward stabilization and sustainable growth. The outcome will also influence the timing and scope of future policy steps, including the brownfield refinery upgrade and energy policy reforms that underpin the RSF objectives.
