IMF announces agreement after seeking fresh assurances on fiscal discipline
ISLAMBAD: The International Monetary Fund (IMF) on Saturday announced a staff-level agreement with Pakistan for the release of about $1.2 billion under two loan tranches, while warning that the ongoing Middle East war could cloud the country’s economic outlook by pressuring growth, inflation and external sector stability.
The IMF said it reached the agreement only after seeking assurances that the government would strictly adhere to pre-war fiscal targets, while the central bank would raise interest rates if inflation exceeds the target range and allow exchange rate flexibility to absorb external shocks arising from the conflict.
The Fund’s assessment contrasts with projections by Pakistan’s Ministry of Finance, which has said the war would have no major economic implications.
IMF Mission Chief to Pakistan Iva Petrova said the Fund had reached a staff-level agreement with Pakistani authorities on the third review under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF). The IMF team held discussions in Karachi and Islamabad from February 25 to March 2, 2026, followed by virtual meetings. The agreement is subject to approval by the IMF Executive Board.
Upon approval, Pakistan will gain access to about $1 billion under the EFF and $210 million under the RSF, bringing total disbursements under the two arrangements to approximately $4.5 billion.
Petrova said ongoing policies had continued to strengthen the economy and rebuild market confidence.
“The conflict in the Middle East, however, casts a cloud over the outlook as volatile energy prices and tighter global financial conditions risk putting upward pressure on inflation and weigh on growth and the current account,” the IMF said. In contrast, Pakistan’s Finance Ministry has projected inflation would rise only marginally by 0.3%, remain within the target, economic growth would stay around 4%, and the current account deficit would remain within $2 billion despite global oil price shocks.
Petrova said Pakistan authorities “remain committed to pursuing sound and prudent macroeconomic policies to preserve the recent gains in macro-financial stabilization, while deepening structural reforms to accelerate growth and strengthening social protection to mitigate the impact of volatile energy prices on the most vulnerable.” Staff Report
