An International Monetary Fund mission has formally initiated technical-level discussions with the State Bank of Pakistan in Karachi as part of the third review of Pakistan’s $7 billion Extended Financing Facility (EFF) and the second review of the $1.1 billion Resilience and Sustainability Facility (RSF). The delegation, led by Iva Petrova, began engagements on Wednesday and is expected to remain in Karachi for the remainder of the week before moving to Islamabad for policy-level consultations.
The review process carries significant weight, as it will determine Pakistan’s eligibility for the next tranche of funding under both programmes. Upon successful completion, the country is expected to unlock approximately $1 billion under the EFF and an additional $200 million through the RSF by the end of April.
After wrapping up discussions with the central bank, the IMF team will begin policy engagements with federal and provincial authorities starting Monday. The customary opening session will be held with Finance Minister Muhammad Aurangzeb, who has expressed confidence in the government’s preparedness for a smooth review. Speaking to journalists after a parliamentary committee meeting, the minister stated that the government was well-positioned regarding the loan programme and revenue collection efforts led by the Federal Board of Revenue.
The review will cover programme performance for the half-year ending December 31, 2025, alongside forward-looking fiscal planning. Budget proposals based on current-year outcomes and preliminary contours of the upcoming fiscal plan will form part of the discussions. Provincial fiscal management will also come under focus, particularly matters related to agriculture income tax, governance gaps, and structural inefficiencies that authorities estimate cost the economy trillions of rupees annually.
Procurement systems and accountability institutions are expected to face closer scrutiny, with attention on institutional independence, operational capacity, procedural integrity, and overall performance benchmarks. These governance elements are increasingly tied to long-term programme sustainability.
On the external financing front, government officials addressed concerns surrounding the United Arab Emirates’ $2 billion deposit with the central bank. The deposit, which typically rolls over annually, expired more than two months ago and has since been extended on a short-term basis. Both the finance minister and Deputy Prime Minister and Foreign Minister Ishaq Dar confirmed that discussions with the UAE government are ongoing and indicated that the deposit would be rolled over. Pakistan continues to rely on annual rollovers from China, Saudi Arabia, and the UAE, with $12.5 billion from these partners forming part of the external financing plan under the EFF framework.
In terms of quantitative performance criteria, Pakistan is expected to meet most of the seven established benchmarks. However, net international reserves are projected to remain slightly below target levels. Reserves are estimated to fall under the $7 billion benchmark set for September 2025 and below $6 billion for December 2025, compared to the $6.5 billion target. Meanwhile, the State Bank’s net domestic assets are projected between Rs12.5 trillion and Rs13.5 trillion, comfortably within the ceiling target range of Rs14.9 trillion to Rs15.1 trillion for the review period.
Although the programme’s performance through December 2025 has largely aligned with agreed thresholds, revenue collection has fallen short of projections. Authorities believe the gap may narrow following a recent Federal Constitutional Court ruling in favour of the government on the super tax matter.
Macroeconomic indicators for the ongoing third quarter will also be examined, with particular attention to the power sector. Recent policy volatility affecting industrial tariffs and residential fixed charges has prompted closer monitoring, even though circular debt figures remain within agreed limits.
The IMF spokesperson noted last week that policy measures implemented under the EFF have contributed to economic stabilisation and improved confidence. As the nearly two-week review progresses through March 11, the outcome will shape both near-term disbursements and the broader trajectory of Pakistan’s economic reform programme.
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