There was a time, not very long ago, when Pakistan’s conversations with the IMF were dominated by missed targets, delayed reviews and last-minute bailouts. The picture heading into May 2026 looks meaningfully different.
The International Monetary Fund has scheduled a meeting of its Executive Board to consider the approval of over $1.2 billion in funding for Pakistan under two ongoing programmes — the $7 billion Extended Fund Facility and the Resilience and Sustainability Facility.
Pakistan has successfully completed all prior actions and conditions required for the combined third and fourth reviews of its $7 billion loan programme. The staff-level agreement was reached on March 27, paving the way for this disbursement.
When the board approves — and the signals strongly suggest it will — Pakistan’s cumulative disbursements under its two active IMF arrangements will reach approximately $4.5 billion. That number tells a story of sustained, difficult, often painful reform. It also tells a story of a country that, for once, did what it said it would.
The Two Programmes — and What Each Unlocks
Pakistan is drawing from two separate but linked IMF arrangements simultaneously.
Pakistan has qualified for approximately $1 billion under the EFF following the successful completion of its third review, along with $210 million under the RSF after the second review. The funding is part of broader efforts to stabilise the economy, strengthen fiscal discipline, and support climate resilience reforms.
The Extended Fund Facility, approved in September 2024 for 37 months, is the primary economic reform programme. It targets macroeconomic stability, tax base broadening, energy sector reform, and structural improvements to state-owned enterprises.
The Resilience and Sustainability Facility, approved in May 2025, is Pakistan’s climate-focused arrangement. It supports Pakistan’s efforts to reduce vulnerabilities to natural disasters and build economic and climate resilience — covering green transport promotion, climate-risk management systems, water resilience, and disaster risk financing frameworks.
Together, they represent a comprehensive reform compact between Pakistan and its most important multilateral creditor.
What Pakistan Met — and What It Missed
The IMF’s staff assessment ahead of the board meeting paints a candid picture — significant progress with specific gaps.
Pakistan has met 14 of the 17 quantitative performance and indicative targets set under its IMF programme for end-December 2025. This achievement places the country on track for approval of the $1.2 billion tranche in May 2026 under the $7 billion Extended Fund Facility.
On the positive side: the State Bank of Pakistan’s net international reserves target was successfully achieved. The ceiling for net domestic assets of the central bank and foreign currency swap and forward positions remained within limits. The government’s primary budget deficit also stayed within the prescribed target.
The IMF has acknowledged that public finances have strengthened, inflation has remained within the target range set by the State Bank of Pakistan, and external reserves have shown steady recovery. Structural reforms in the energy sector are progressing, aimed at improving efficiency and reducing circular debt. Economic activity has also begun to recover, with growth momentum building during FY25 and continuing into the current fiscal year.
On the gaps: the Federal Board of Revenue could not share required data regarding income tax collection from retailers. Data on the target of adding 500,000 new tax return filers was also unavailable at the time of assessment despite earlier commitments. These are administrative and transparency gaps rather than structural failures — but the IMF noted them formally.
The Petroleum Levy: A Revenue Story the Numbers Confirm
One of the IMF programme’s most closely watched metrics — and one of the most politically sensitive — is the petroleum levy target.
Both sides have been engaged in policy adjustments, particularly in fuel pricing and the gradual withdrawal of subsidies, to meet the petroleum levy target of Rs1.47 trillion for the current fiscal year. Collections have already exceeded Rs 1.2 trillion in the first nine months, putting the government on track to surpass the annual target.
This matters because the petroleum levy is one of Pakistan’s most reliable non-tax revenue instruments — and because raising it directly impacts ordinary consumers. The fuel relief packages announced by federal and provincial governments in April 2026 were in part a response to the social pressure generated by levy-driven price increases that the IMF programme required.
The IMF has advised Pakistan to phase out fuel subsidies as part of its fiscal consolidation efforts. Discussions are ongoing between Pakistan and the IMF regarding flexibility in programme parameters, which are expected to be finalised in the upcoming federal budget.
Read more: How Regional Conflicts Are Impacting Pakistan’s Petrol & Diesel Prices
Fiscal Targets: Pakistan Commits to Surpluses
Pakistan’s fiscal commitments to the IMF reflect the most ambitious targets the country has accepted in recent memory.
Pakistan has committed to maintaining a sustainable fiscal path, targeting a primary surplus of 1.6 percent of GDP in FY26 and 2 percent in FY27. These goals are supported by efforts to broaden the tax base, enhance revenue collection through digitalisation and improved audits, and strengthen expenditure discipline, while continuing to expand social sector spending.
A further 17 key economic targets have been set with a June 2026 deadline. The central bank’s net foreign exchange reserves target has been revised from negative $4.8 billion to negative $4.4 billion, with expectations of improvement to $2 billion in the next fiscal year. The government has committed to limiting guarantees to Rs5.8 trillion and increasing income tax returns by one million by end of the fiscal year, with an additional 750,000 returns targeted by March 2027.
These are not aspirational targets. They are binding commitments with built-in consequences — missed benchmarks delay disbursements, which affects reserves, which affects the rupee, which affects inflation. The incentive structure is tight.
Monetary Policy: Holding Steady Under Pressure
One of the more striking aspects of Pakistan’s current economic stance is the State Bank’s decision to hold its policy rate at 10.5 percent — pausing a rate-cutting cycle that had already delivered 1,100 basis points of cuts since June 2024.
Pakistan’s central bank kept its key policy rate unchanged at 10.5 percent this month, pausing its rate cuts as rising global energy prices and regional tensions pose new inflation risks for the import-dependent economy. The IMF is urging Islamabad’s policymakers to keep monetary policy tight and data-dependent to anchor inflation expectations and strengthen external buffers.
The Middle East conflict — which pushed Pakistan’s petrol prices to Rs458 per litre and triggered a nationwide fuel relief package — is the direct reason for the pause. The SBP correctly identified that cutting rates into an inflationary energy shock would undermine the disinflation progress that took years to achieve.
The Middle East Risk Hanging Over the Programme
The IMF is not naive about the external environment in which Pakistan is operating.
The IMF cautioned that risks persist due to the Middle East conflict, which could lead to volatile energy prices and tighter global financial conditions, potentially impacting inflation and economic growth.
Global uncertainties, particularly geopolitical tensions in the Middle East, continue to pose risks through volatile energy prices and tighter financial conditions globally, necessitating cautious economic planning.
For Pakistan, this is not an abstract risk. The country imports the vast majority of its energy needs. When the Strait of Hormuz closed and global oil prices surged, Pakistan was forced to sign an emergency LNG deal at $18.4 per mmBtu — more than double normal market rates — just to maintain supply. That single contract imposed a measurable hit on the current account.
The same conflict that generated Pakistan’s diplomatic moment — the mediation that earned global recognition — also generated Pakistan’s most severe external economic shock of the current fiscal year. Managing both simultaneously has been the defining challenge of the Shehbaz government’s economic stewardship.
What $4.5 Billion in Disbursements Means
When the May 2026 tranche is approved, Pakistan’s total receipts under its two active IMF programmes will reach approximately $4.5 billion. That figure deserves context.
Pakistan’s gross foreign exchange reserves stood at $9.4 billion in August 2024, when the current EFF began. Gross reserves reached $14.5 billion at end-FY25, up from $9.4 billion a year earlier, and are projected to continue to be rebuilt in FY26 and over the medium term.
The State Bank of Pakistan aims to increase reserves to $18 billion by June 2026. That target, if achieved, would represent nearly a doubling of Pakistan’s reserve buffer in under two years — transforming the country’s ability to weather external shocks from a position of chronic fragility to something approaching genuine resilience.
The IMF money is one part of that equation. Saudi Arabia’s $5 billion pledged investment, the diplomatic dividends of the ceasefire mediation, remittances running at $38–42 billion annually, and the new Iran transit corridor revenue all feed into the same trajectory.
The Road Ahead: Budget 2026-27 and What It Must Deliver
The May disbursement is not the end of the story. It is the beginning of the next chapter.
The upcoming IMF review will also set the broad contours for the Federal Budget 2026-27. The business community expects the government to negotiate flexibility in tax targets for the formal manufacturing sector, potentially reducing corporate tax from 29 percent to 25 percent to foster competitiveness.
The government has pledged to accelerate institutional reforms within the FBR to improve governance and ensure effective implementation of fiscal measures critical to long-term economic stability. Pakistan is also committed to expanding social sector spending — in health, education and social protection — as part of its fiscal framework.
The IMF’s patience with Pakistan’s reform programme has been notable. But patience has a condition: progress. The May board meeting will confirm that Pakistan has earned the next disbursement. What the federal budget delivers in the weeks that follow will determine whether Pakistan earns the next one after that — and whether the country finally breaks the cycle of returning to the IMF every few years with the same structural weaknesses intact.
Frequently Asked Questions (FAQs)
Q: When will Pakistan receive the $1.2 billion IMF disbursement? The IMF Executive Board is scheduled to meet in early May 2026 — with dates of May 6 and May 8 cited by different sources — to formally approve the disbursement. Once approved, funds are typically transferred within days and reflected in the State Bank of Pakistan’s foreign exchange reserves that same week.
Q: What are the two IMF programmes Pakistan is drawing from? Pakistan is drawing from the Extended Fund Facility — a $7 billion, 37-month programme approved in September 2024 covering economic stabilisation and structural reform — and the Resilience and Sustainability Facility, a $1.4 billion, 28-month climate-focused programme approved in May 2025. The May tranche of approximately $1 billion comes from the EFF and $210 million from the RSF.
Q: Has Pakistan met all the IMF’s conditions for this disbursement? Pakistan met 14 of 17 quantitative performance targets for December 2025. The three shortfalls involved data availability rather than policy failures — specifically, the FBR was unable to provide income tax data from retailers and new tax filer numbers. All key financial targets including reserve levels, primary surplus, and monetary policy benchmarks were met.
Q: What is Pakistan’s primary surplus target and why does it matter? Pakistan has committed to achieving a primary budget surplus — meaning revenues exceed non-interest expenditure — of 1.6 percent of GDP in FY26 and 2 percent in FY27. This is a critical fiscal discipline benchmark that demonstrates Pakistan can service its obligations without borrowing to pay running costs. Achieving it consistently is what separates a country in genuine reform from one simply managing its next debt rollover.
Q: How much total IMF money will Pakistan have received once this tranche lands? Total disbursements under Pakistan’s two active IMF programmes will reach approximately $4.5 billion upon approval of the May tranche, out of a combined available envelope exceeding $8 billion across the EFF and RSF. The remaining disbursements are contingent on completing future reviews through 2027.
Q: What are the biggest risks to Pakistan’s IMF programme going forward? The IMF explicitly flagged the Middle East conflict as the primary external risk — through its impact on global energy prices, tighter financial conditions and Pakistan’s import bill. Domestically, the main vulnerabilities are FBR’s tax collection shortfalls, the slow broadening of the tax base, and the political difficulty of maintaining fuel pricing discipline while managing public pressure from high petrol prices. Budget 2026-27 will be the next major test of whether Pakistan’s reform trajectory is genuine or fragile.