IMF talks likely to clear way for $1.2bn disbursement

Pakistan's ongoing discussions with the International Monetary Fund (IMF) staff mission are set to conclude positively this week, allowing for the disbursement of approximately $1.2 billion under two simultaneous programs - the $7 billion Extended Fund Facility (EFF) and the $1.4 billion Resilience and Sustainability Facility (RSF).

The two sides are currently finalizing the Memorandum of Economic and Fiscal Policies (MEFP) after addressing the substantive aspects of the biannual review. The IMF staff mission, headed by Ms Iva Petrova, is expected to complete its visit within the next few days, with no new demands from the Fund, except for adjustments to address past delays.

The revenue target remains unchanged, with an emphasis on achieving the half-yearly goal following a robust start in the first quarter. However, Pakistan is grappling with finalizing the liquefied natural gas (LNG) import plan for December to February due to a challenging supply situation caused by the US-Iran conflict. The energy task force has promised to provide 10-12 cargoes of around 100 million cubic feet each on a best-effort basis.

The LNG import plan's impact on current account targets agreed upon by the Ministry of Finance and the IMF has gained importance, with actual imports possibly limited to seven to eight cargoes over the three winter months. The government has pledged to reduce cross-subsidies from the industrial sector and implement BISP-based subsidies for the poorest power sector consumers starting next January.

The authorities may need to take additional steps between the conclusion of the IMF talks and the scheduling of the Fund's Executive Board meeting to facilitate the disbursement of $1.2 billion and request waivers for unavoidable delays in meeting the end-June 2026 targets.