Analysts see IMF deal as strong signal of policy continuity

Topline Research says the swift staff-level agreement between Pakistan and the IMF underscores strong policy credibility, sustained reform momentum, and improved investor confidence amid ongoing fiscal and external challenges

Pakistan and IMF have reached a Staff Level Agreement (SLA) for the Second Review for the 37-month Extended Arrangement under the Extended Fund Facility (EFF) and a first review of the new 28-month Arrangement Under the Resilience and Sustainability Facility (RSF) on Oct 14, 2025.Pakistan assures financial commitments to IMF

Pakistan has managed to get this agreement within 6 days of the completion of IMF team visit to Pakistan from Sep 24 to Oct 08, 2025 and there seems to be no strings attached to board approval for the second consecutive review i.e. completion of any prior actions or seeking financing assurances etc. In the past we have seen conditions like confirmation of necessary financing assurance from Pakistan’s development and bilateral partners linked with board approval (Jul 2024 staff level agreement condition) and some other conditions in recent staff level agreements of Bangladesh and Sri Lanka.

Notably, securing the SLA this time in just 6 days is faster than the March 2025 review, which took around 11 days. Before this, at the time of signing this new facility of US$7bn in Jul 2024, SLA was achieved in nearly 50 days (May 23, 2024 to Jul 12, 2024). The quicker pace of SLA signals Pakistan’s commitment to economic reforms, we believe. Few of the highlights from press release are below;

Pakistan to continue fiscal consolidation: Pakistan is expected to post fiscal primary surplus 1.6% of GDP, in line with our revised projections published on Sep 20, 2025. Any risk to revenue target will be addressed through tax policy and compliance measures.

Pakistan to continue with appropriately tight and data dependent Monetary Policy: To ensure inflation remains in medium term target range of 5-7%, Pakistan will continue with data dependent and tight monetary policy stance, as per press release.

IMF believes, floods may temporarily impact prices and also mentioned that State Bank of Pakistan (SBP) remains ready to adjust its policy stance should price pressures intensify or inflation expectations become unanchored. We recently increased our inflation projections from earlier 6%-7% to revised 6.5%-7.5% in our Sep 20, 2025 publication after accounting for the flood inflation and we expect SBP to maintain status quo in policy rate during FY26.

Pakistan to receive US$1.2bn after board approval : Once IMF board approves the review, the Pakistan will receive US$1.2bn from IMF, out of this US$1bn will be under EFF program and US$200mn under the new RSF facility. Board approval generally takes 4-6 weeks from the SLA approval date. We believe, with this amount, central bank is likely to achieve its Dec 2025 reserves target of US$15.5bn.

Restoring the energy sector viability: Pakistan will continue with commitment to prevent the accumulation of circular debt through timely tariff adjustments that ensure cost recovery and maintaining a progressive tariff structure. The government will also work on the agenda of privatization and efficiencies of the distribution companies besides transitioning to competitive electricity market.

Climate resiliency: The steps which government has taken are promotion of green mobility and transport decarbonization. The authorities remain committed to advancing future reforms, including strengthening the climate information architecture and financial risk management, improving water system resilience, establishing a framework for coordinated disaster risk financing, and aligning energy sector reforms with national mitigation commitments.