IMF talks near completion, paving way for $1.2bn Pakistan disbursement

Pakistan’s discussions with the International Monetary Fund (IMF) are expected to conclude successfully this week, potentially clearing the way for the release of around $1.2 billion under the ongoing $7 billion Extended Fund Facility (EFF) and $1.4 billion Resilience and Sustainability Facility (RSF).

Officials are now finalising the Memorandum of Economic and Fiscal Policies (MEFP) after reaching broad agreement on the main issues covered during the latest review. The IMF mission, led by Iva Petrova, is expected to complete its visit within the next few days.

Sources said the Fund had not introduced any major new conditions. Instead, discussions focused on corrective measures to address earlier shortcomings. The government’s overall revenue target remains unchanged, with greater emphasis being placed on meeting the half-yearly collection goal after tax revenues surpassed the first-quarter target.

The talks are taking place as Pakistan faces uncertainty over its liquefied natural gas (LNG) supplies for the coming winter. Authorities are working on an import plan for December through February amid disruptions linked to the US-Iran conflict.

Energy authorities had initially requested at least 22 LNG cargoes for the three-month period. However, an energy task force has indicated that only 10 to 12 cargoes may be arranged on a best-effort basis through diplomatic and logistical channels. Each cargo is estimated to cost about $100 million and would require approval from the Finance Ministry and the State Bank of Pakistan.

Officials believe actual imports could remain at around seven to eight cargoes during the winter, closer to the government’s preferred level and its commitments to the IMF regarding the current account.

Pakistan and the Fund have also agreed to accelerate preparations for targeted gas subsidies through the social protection system. The government plans to use the Benazir Income Support Programme (BISP) to provide targeted assistance to low-income electricity consumers from January next year after the revised base tariff is introduced.

The government has also assured the IMF that it will work to reduce industrial cross-subsidies and control the growing circular debt in the gas sector. Gas-sector debt has risen to around Rs3.6 trillion, including approximately Rs1.8 trillion in principal liabilities and a similar amount in accumulated interest and late-payment charges.

Officials said the protected category for domestic gas consumers, with prices ranging from Rs200 to Rs350 per million British thermal units, has widened the gap between tariffs and supply costs. During winter, only four of the 12 consumer categories covered the cost of gas, while the remaining slabs remained below breakeven levels for much of the year.

Although the agreed measures are not being treated as formal prior actions, Pakistan may need to complete several steps before the IMF Executive Board considers the review. The government is also expected to seek waivers for unavoidable deviations from targets set for the end of June 2026.

Under an IMF structural benchmark, Pakistan must introduce a major reform by January 2027 to replace the existing tariff-differential and cross-subsidy arrangements with a targeted subsidy system for low-income consumers through BISP.

The World Bank is supporting efforts to link electricity consumers with the National Socio-Economic Registry. The government has committed to completing the technical integration and verification process by the end of November to establish eligibility for targeted assistance.

The IMF has also called for greater transparency in the Inland Freight Equalisation Margin, a mechanism used to maintain uniform petroleum prices across different parts of the country.