Negotiations for the third economic review between Pakistan and the International Monetary Fund (IMF) have formally begun, with crucial meetings underway in Karachi.
The talks are part of the $7 billion Extended Fund Facility (EFF), and successful negotiations could unlock a $1.2 billion installment for Pakistan.
The IMF delegation has arrived in Pakistan for a two-week visit that will continue until March 11, according to officials from the Ministry of Finance.
In the first phase, the IMF mission is holding meetings with officials of the State Bank of Pakistan (SBP) in Karachi. The delegation visited the SBP head office and met the governor before scheduled engagements with Finance Ministry officials.
State Bank Chief Spokesperson Noor Ahmed confirmed that talks with the IMF were underway. Officials briefed the delegation on economic performance and shared technical data from the outset.
Focus on monetary policy, exchange rate
During the meetings, SBP officials provided a detailed briefing on maintaining a flexible exchange rate policy. The IMF was assured that prudent monetary policy would continue under the ongoing program.
In view of inflation trends, the policy rate remains at 10.5%, officials informed the delegation. The next Monetary Policy Committee meeting is scheduled for March, where the interest rate will be reviewed.
The IMF was also briefed on foreign exchange reserves, the current account balance, and improvements in overall macroeconomic indicators.
Inflation, growth, industrial recovery
Officials told the IMF that inflation eased to 5.6% in December. For the current fiscal year, inflation is expected to remain between 5% and 7%.
Economic growth is projected in the range of 3.75% to 4.75% for the ongoing fiscal year. Large-scale manufacturing and other key economic indicators have shown improvement, according to the briefing.
The IMF delegation was informed about enforcement measures aimed at ensuring strict regulation of the financial sector. Briefings also covered efforts to prevent money laundering and terror financing.
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Authorities shared updates on progress related to anti-money laundering (AML) and counter-terror financing (CTF) frameworks as part of compliance commitments.
From Monday, the IMF review mission will shift to Islamabad for technical and policy-level talks with the Ministry of Finance and other ministries.
The delegation will be briefed on the budget, taxation measures, reforms, and the new budget plan. Key features of the upcoming Budget 2026–27 and economic targets are also expected to be discussed.
Review under EFF, RSF programs
The visit is part of the third review under the $7 billion EFF program. Simultaneously, negotiations are also underway for the second review of the $1.1 billion Resilience and Sustainability Facility (RSF) program, with some reports indicating discussions linked to a $1.4 billion RSF framework.
If the IMF Executive Board approves the review following successful negotiations, Pakistan will receive $1.2 billion.
Targets achieved and shortfalls
Officials highlighted several key achievements, including maintaining a primary surplus, achieving a provincial cash surplus, and increasing provincial tax collections.
However, the Federal Board of Revenue (FBR) failed to expand the tax net as targeted and fell short by Rs329 billion.
A plan of action has been prepared to implement recommendations under the Governance and Corruption Diagnostic Report. Progress in energy sector reforms and privatization will also be presented to the IMF mission.
As talks continue over the coming days, the outcome of the review will be crucial for Pakistan’s economic stability and access to external financing.
