Pakistan Inches Toward IMF Staff-Level Agreement as Flood Losses Are Tallied
Pakistan is edging closer to finalising a staff-level agreement (SLA) with the International Monetary Fund (IMF), with the talks focused on the external account, verified flood-related losses, and the necessary fiscal adjustments across central and provincial accounts. The progress comes as the country prepares to participate in the IMF-World Bank annual meetings, where key policy decisions are expected to be discussed and validated.
According to the Dawn newspaper, the finalisation hinges on aligning the external account figures with the IMF’s expectations and confirming the scope and scale of flood damages. Officials noted that two critical tables within the MEFP (Memorandum of Economic and Financial Policies) require final adjustments to reflect the latest data, particularly on remittances, which could influence the stance on the external balance.
“We were at the cusp of finalising the SLA, but two crucial tables that form part of the MEFP required further adjustments,” an official said, underscoring the need for up-to-date foreign remittance data to strengthen Pakistan’s position on the external account. The statement also highlighted the ongoing caution in the monetary policy stance adopted by the State Bank of Pakistan (SBP) in response to rebounding inflation.
Key Conditions: External Accounts, Flood Losses, and Fiscal Adjustments
Officials emphasised that timely corrective measures, including tariff adjustments, are essential for the sustainability of the programme. The government will need to ensure the timely disbursement of subsidies and settlement of pending provincial bills in flood-affected districts. Provinces will also be required to deliver cash surplus targets even as they absorb adjustments for flood losses.
“The provinces, with adjustments against flood losses, must also deliver their cash surplus targets,” a senior official stated. The government plans to maintain a tight fiscal policy and place development projects in flood-affected regions on hold until further notice, while ensuring that development funds are disbursed in a cash-efficient manner.
The IMF’s end-of-mission statement noted that there had been significant progress toward finalising the SLA on the second review under the 37-month Extended Fund Facility (EFF) and the first review of the 28-month Resilience and Sustainability Facility (RSF). The mission also stressed that policy discussions would continue to settle any outstanding issues ahead of the board’s review.
Next Steps: Meetings and Expected Disbursements
Pakistan’s delegation, led by the finance minister and including the SBP governor and the chairman of the Federal Board of Revenue (FBR), is scheduled to attend the upcoming IMF-World Bank annual meetings. Official sources confirmed that the IMF had shared the draft MEFP with Pakistani authorities before a two-week visiting mission to Karachi and Islamabad (September 24 to October 8) concluded the talks.
Officials expect a combined IMF tranche of around USD 1.2 billion next month, subject to board approval, contingent on the SLA’s outcome from policy discussions in the coming days. The IMF affirmed that programme implementation remained strong and broadly aligned with the authorities’ commitments, adding that work would continue to address any remaining issues and that sympathy would be extended to those affected by the floods.
In sum, the path to the SLA is guided by a balance of stabilising the external account, validating flood loss estimates, and maintaining disciplined fiscal management across government tiers. If the forthcoming meetings yield a consensus, Pakistan could move closer to securing the expected disbursements and continuing its IMF-supported reform agenda.
