IN a sign of steady engagement between Pakistan and the International Monetary Fund (IMF), the two successfully concluded the latest round of talks leading to signing of a Staff Level Agreement (SLA), paving the way for the release of about $1.2bn from the Fund’s resources in four to five weeks. Upon approval by the Board, Pakistan will have access to about $1billion (SDR 760 million) under the Extended Fund Facility (EFF) and about $210 million (SDR 154 million) under the Resilience and Sustainability Facility (RSF), bringing total disbursements under the two arrangements to about $5.7 billion. The Fund said Pakistan had maintained macroeconomic stability despite the impact of the Middle East conflict, with strong policies helping the economy withstand higher energy prices and supply disruptions. Real GDP growth reached 4% during the first three quarters of FY26, while full-year growth is estimated at 3.6%. Headline inflation moderated to about 10.3% in September after peaking in May, while core inflation remained contained.
The continued engagement with the IMF and signing of the SLA carry major financial and structural significance for the country as it would unlock the next tranche under the ongoing loan package, bolster foreign exchange reserves and signal confidence to other lenders like the World Bank, Asian Development Bank and bilateral allies. The development and the confidence reposed by the IMF in the economic potential of Pakistan can be described as an international audit, confirming that the country’s fiscal consolidation and inflation targets are on track. The understanding keeps the government committed to painful structural adjustments, including tax base expansion and energy sector viability. It would also help advance adaptation goals under the Resilience and Sustainability Facility (RSF) to handle climate vulnerabilities. Finance Minister Muhammad Aurangzeb and his team deserve credit for keeping the relationship with the IMF intact despite various odds and challenges, which improves prospects for a positive economic outlook for the country. It is hoped they would be able to maintain the tempo of reforms aimed at putting the country on its own feet financially and economically. No one would differ with the broad objectives that Pakistan and the IMF want to achieve through their sustained engagement but experts and people of Pakistan have serious concerns over the modus operandi used to move towards realization of these goals. People at large have paid a heavy price for economic reforms and structural adjustments in the form of unprecedented inflation and addition of tax burden on the existing tax payers and this trend is likely to persist as the government has committed to stay on course as far as adjustment in energy tariff and liberalization of exchange rate regime is concerned. This is in sharp contrast to the expectations and aspirations of people of Pakistan, who are impatiently waiting for governmental moves to bring down prices of electricity. Similarly, people are legitimately protesting against unjust petroleum levy but there is no indication in the statement issued by the IMF on conclusion of the latest review about possibility of any relief on this account. One fails to understand what the government will be able to offer in this regard during talks with Jamaat-e-Islami (JI), for which an indirect commitment was made by Prime Minister Shehbaz Sharif on whose behest the party deferred its planned march on Islamabad. Not to speak of any relief vis-à-vis petroleum levy, the IMF has objections to the fuel subsidy programme of the Prime Minister, which has offered relief to some extent to a segment of the population. The IMF has expressed the hope that a comprehensive medium-term tax reform strategy should make the system fairer, simpler and more growth-friendly, while protecting revenues and reducing distortions but this seems to be a Herculean task given non-cooperative attitude of tax dodgers and inability of the State to make them compliant.
