Washington, March 28 (NationPress) The International Monetary Fund has finalized a staff-level agreement with Pakistan that could potentially release approximately $1.2 billion in new funding, as the nation advances towards fiscal tightening, structural reforms, and initiatives aimed at stabilizing both inflation and economic growth.

This agreement is the result of discussions held between an IMF delegation and Pakistani officials regarding the third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF).

According to the IMF's statement, “the team has successfully reached a staff-level agreement with Pakistani authorities,” emphasizing that the deal is pending approval from its Executive Board.

Upon receiving approval, Pakistan would be entitled to about $1.0 billion under the EFF along with approximately $210 million from the RSF, bringing the total disbursements from these programs to around $4.5 billion.

The IMF noted that Pakistan's program implementation “has remained largely in line” with its objectives to enhance public finances, control inflation, and drive structural reforms.

There are indications of an economic rebound. The statement highlighted that “following the recovery in FY25, economic activity has gained additional momentum,” while inflation and the current account balance have remained stable, and external buffers have seen improvement.

Nonetheless, challenges persist. The IMF cautioned that the ongoing conflict in the Middle East could adversely affect Pakistan's outlook through fluctuating energy prices and stricter global financial conditions.

The authorities have pledged to uphold a “prudent fiscal stance” aimed at diminishing public debt, with a goal of achieving a primary surplus of 1.6 percent of GDP in FY26 and 2 percent in FY27.

Enhancing revenue mobilization is critical. The Federal Board of Revenue is undertaking reforms such as more rigorous taxpayer audits and broader digital monitoring systems, while a new Tax Policy Office is formulating a medium-term reform strategy.

In terms of monetary policy, the State Bank of Pakistan is expected to maintain vigilance. The IMF has indicated it “is prepared to increase interest rates” should inflationary pressures escalate, while a flexible exchange rate is anticipated to serve as a buffer against shocks.

Reforms in the energy sector remain essential to the program. The authorities are focused on averting a resurgence of circular debt, ensuring cost recovery through tariff adjustments, and advancing privatization and efficiency improvements.