IMF Mission Begins Review with State Bank of Pakistan
An International Monetary Fund mission led by Iva Petrova has started technical-level discussions with the State Bank of Pakistan in Karachi. The visit covers the third review of the $7 billion Extended Fund Facility and the second review of the $1.1 billion Resilience and Sustainability Facility. For now, the focus is on detailed data and technical issues, such as reserves, borrowing and domestic assets.
From next week, the mission is expected to shift to Islamabad for policy-level talks with the federal and provincial governments. These discussions will begin with an opening session with Finance Minister Muhammad Aurangzeb. He has said that the government is well positioned for a successful review and feels confident about revenue collection performance by the Federal Board of Revenue.
Safe Deposits from UAE, China and Saudi Arabia Under Spotlight
One key area in the IMF review is Pakistan’s foreign exchange buffers, including safe deposits placed by friendly countries. Pakistan currently relies on around $12.5 billion in deposits from China, Saudi Arabia and the United Arab Emirates to meet its external financing needs under the IMF programme.
Questions have been raised about the rollover of the UAE’s $2 billion deposit, which is usually extended each year and has recently been on short-term rollovers. Finance Minister Aurangzeb has told reporters that there is absolutely no issue with the UAE rollover and that both sides are in regular contact. Deputy Prime Minister and Foreign Minister Ishaq Dar has also assured that the $2 billion deposit will be rolled over automatically, saying that talks with the UAE are ongoing and on track.
Reviewing Economic Performance and the Upcoming Budget
During this almost two-week visit, ending on March 11, the IMF team and Pakistani authorities will review programme performance for the half-year ending December 31, 2025. They will also begin forward-looking work, including early discussions on the next federal budget. This includes looking at how this year’s results will shape revenue targets, spending priorities and new policy measures.
Provinces are expected to come under closer review as well, particularly on their finances and reforms. Topics on the table include agriculture income tax, coordination between federal and provincial tax systems, and governance challenges that lead to large economic losses. Procurement and accountability agencies will also face questions about their independence, capacity and performance, as the IMF wants to see stronger checks on waste and corruption.
Targets Met, But Structural Reforms Still Lagging
Early assessments suggest that Pakistan has broadly met most of the quantitative performance criteria for the review period. However, there has been a revenue shortfall compared to targets. Authorities believe the gap can be narrowed after a recent ruling by the Federal Constitutional Court in favour of the government over the super tax, which could help boost collections.
On the technical side, Pakistan appears on track to meet almost all seven quantitative indicators. Net international reserves, however, are likely to stay slightly below the agreed benchmarks for both September and December 2025. The State Bank’s net domestic assets are estimated to remain well below the ceiling, which is a positive sign for monetary discipline. Even so, Pakistan is lagging on several indicative targets and structural benchmarks, especially in areas like governance and market reforms. These gaps could affect the speed and strength of future programme implementation.
Power Sector, Future Disbursements and What Is at Stake
The power sector remains a sensitive and closely watched issue in the IMF talks. Recent months have seen policy changes affecting industrial tariffs, fixed charges for households and other pricing decisions. Although the stock of circular debt is reported to be within the agreed limits, the IMF is expected to push for clearer plans to keep it under control and to reduce losses going forward.
If the current review is completed successfully, Pakistan could receive about $1 billion under the Extended Fund Facility and another $200 million under the Resilience and Sustainability Facility by the end of April. These inflows would support foreign exchange reserves and help maintain confidence in the economy.
IMF officials have recently stated that Pakistan’s policy efforts under the programme have helped stabilise the economy and rebuild confidence. However, the next phase will demand more progress on deeper reforms in tax, energy and governance. For ordinary Pakistanis, the outcome of these talks will influence inflation, growth prospects, and the government’s ability to protect social spending while staying on a reform path.
