Overview: IMF ties close to Pakistan’s external accounts and flood losses
Pakistan is nearing the finalisation of a staff-level agreement (SLA) with the International Monetary Fund (IMF), the Dawn newspaper reported. The deal hinges on consensus around the country’s external account and the verification of flood-related losses, as well as how these will be reflected in fiscal adjustments across central and provincial authorities. The forthcoming IMF-World Bank annual meetings are seen as the likely venue where these issues will be resolved, with Pakistan’s delegation set to leave for Washington at the weekend.
The IMF has already circulated a draft Memorandum of Economic and Financial Policies (MEFP) to authorities before a two-week visiting mission wrapped up in Pakistan. The mission, which visited Karachi and Islamabad from September 24 to October 8, was focused on the second review under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF).
What could finalise the SLA?
Officials said the SLA was close to completion, but two essential tables within the MEFP require further adjustment. They noted that recent data on foreign remittances could bolster Pakistan’s case on the external account, reinforcing the government’s stance ahead of the meetings. An official familiar with the talks emphasised the need for a cautious monetary stance from the State Bank of Pakistan (SBP) given rebounding inflationary pressures.
Flood-related losses remain a critical, still-unresolved component. Final verification of losses and the corresponding fiscal adjustments across central and provincial budgets are required before the SLA can be signed. The provinces are under pressure to achieve cash surplus targets even as they shoulder adjustments for flood damages, while development funds are expected to remain tightly controlled and many projects in flood-affected regions may stay on hold for now.
Policy signals and subsidy disbursements
The IMF mission underscored that timely corrective actions, including tariff adjustments, would be essential for programme sustainability. The authorities are therefore expected to ensure timely disbursement of committed subsidies and settle pending provincial bills where consumer bills had been waived or relaxed in flood-affected districts. These measures aim to keep the fiscal path on track while addressing immediate post-disaster needs.
In its end-of-mission statement, the IMF acknowledged significant progress toward finalising the SLA for the second review under the 37-month EFF and the first review of the 28-month RSF. While promising, the statement also noted that policy discussions would continue to settle any remaining outstanding issues. The IMF also expressed sympathy for flood-affected communities, underscoring the humanitarian dimension of the programme alongside the economic reforms.
Outlook: funding and timeline
Pakistan is anticipated to receive around USD 1.2 billion as a combined tranche from the EFF and RSF next month, subject to board approval and the SLA outcome from the forthcoming policy-level discussions. The government expects a constructive path forward as the discussions proceed during the IMF-World Bank annual meetings. The overall programme implementation is described by the IMF as broadly aligned with the authorities’ commitments, signaling a potential pathway to stability if the remaining issues are resolved promptly.
What this means for Pakistan
With external accounts stabilising and flood damages being properly accounted for, Pakistan could unlock relief that supports ongoing macroeconomic stabilization. The outcome will influence the pace of development spending, social protection measures, and the broader trajectory of economic reform in the coming months. As talks continue, market watchers will be watching for how quickly lender discretion translates into disbursements and how the fiscal framework holds under pressure from both inflation and climate-related expenditures.
