The International Monetary Fund (IMF) delegation on Monday held a meeting with the Federal Minister for Finance Muhammad Aurangzeb for the second economic review under the $7 billion Extended Fund Facility (EFF). The introductory meeting, initially scheduled for September 25, was rescheduled for Monday (September 29) due to the absence of Finance Minister, and the talks would continue for next few days. The Finance Minister briefed the delegation about the overall economic situation of the country.
The review covers the period up to end-June 2025 for both the $7 billion Extended Fund Facility (EFF) and the $1.4 billion climate-linked Resilience & Sustainability Facility (RSF). Since the EFF and RSF are reviewed twice a year, both sides will have to reach an agreement on past performance as well as future commitments.
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Programme Performance and Compliance
An official confirmed that Pakistan has almost met all quantitative performance criteria for end-June 2025, but it continues to lag behind on indicative targets and structural benchmarks. The government will brief the Fund on the missing tax collection target in previous year and provincial cash surpluses.
Key economic stakeholders, including the State Bank of Pakistan governor, finance secretary, and chairman of the Federal Board of Revenue (FBR), attended the initial session with the IMF mission.
Post-Flood Situation and Fiscal Targets
A primary focus of the ongoing dialogue is the fiscal impact of recent natural disasters. The government has finalized a Rs389 billion relief package for flood victims. An official informed that the government will brief the Fund on the post flood situation, which would affect the fiscal position.
To accommodate the necessary expenditures related to the natural disaster, the government might look for relaxations in primary budget surplus and fiscal deficit targets to meet the flood-related expenditures. Notably, the government is not willing to impose new taxes to meet the additional expenditures.
Context of Previous Disbursements
Upon the successful conclusion of the review, Pakistan will qualify for disbursement of about $1 billion (equivalent to 760 million IMF special drawing rights) by the end of next month.
This follows the Executive Board decision in May this year, when the IMF had approved the immediate disbursement of about $1 billion to Pakistan under the ongoing EFF and allowed an additional arrangement for the $1.4 billion Resilience and Sustainability Facility (RSF). At that time, the IMF stated: “This decision allows for an immediate disbursement of around $1bn (SDR 760 million), bringing total disbursements under the arrangement to about $2.1bn (SDR 1.52bn). In addition, the IMF Executive Board approved the authorities’ request for an arrangement under the RSF, with access of about $1.4bn (SDR 1bn).”
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