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Aftab Maken
ISLAMABAD: Lack of clarity on the Governance and Corruption Diagnostic (GCD) report and pending confirmation of external financing have delayed Pakistan’s staff-level agreement (SLA) with the International Monetary Fund (IMF), though officials remain hopeful the deal will be concluded during Finance Minister Muhammad Aurangzeb’s upcoming visit to Washington.
According to senior government sources, while Pakistan and the IMF made substantial progress during two weeks of negotiations in Islamabad, two crucial tables under the Memorandum of Economic and Financial Policies (MEFP) — related to the Balance of Payments (BoP) and external financing requirements — remain unresolved. These are expected to be finalised in the coming week after updated data and external confirmations are reviewed.
A top official confirmed that the IMF had shared the draft MEFP before the mission concluded its visit, adding that the two sides were “at the cusp of finalising the SLA.” The official said recent improvements in foreign remittances data had strengthened Pakistan’s external account position. However, the IMF continues to await verified estimates of flood-related losses before endorsing fiscal adjustments across both federal and provincial accounts.
The IMF has also raised concerns over the delay in releasing the Governance and Corruption Diagnostic (GCD) Assessment report — a structural benchmark under the current programme — which has yet to be published. The Fund considers the release of this report essential for transparency and for setting future governance reform benchmarks.
Officials said the Fund’s mission appreciated the performance of Pakistan’s power sector, particularly the Power Division led by Secretary Dr. Fakhre Alam Irfan, for surpassing nearly all performance indicators. However, the IMF emphasized that sustainability will depend on continued tariff rationalisation and timely implementation of corrective actions.
The government has been cautioned to ensure prompt disbursement of committed subsidies, particularly payments to provincial governments in districts where electricity bills were waived or deferred following last year’s devastating floods. The IMF has also stressed that provinces must deliver their agreed cash surpluses after adjustments for flood-related spending.
On the fiscal side, Islamabad plans to maintain a tight budgetary stance, prioritising only essential development projects and keeping most new development spending in flood-affected areas on hold until financing gaps are addressed.
At the same time, the Federal Board of Revenue (FBR) is preparing to revise its revenue collection target downward to reflect current economic realities. Officials confirmed that new fiscal measures to bridge potential revenue shortfalls are being prepared for implementation by January 1, 2026. The revised plan will also aim to address tax administration inefficiencies and improve compliance without placing an additional burden on already strained sectors.
The State Bank of Pakistan (SBP), meanwhile, is expected to maintain its cautious monetary policy stance amid persistent inflationary pressures. Officials said the IMF had noted the need for coordination between fiscal and monetary policy to ensure macroeconomic stability.
Pakistan’s delegation — comprising the finance minister, SBP governor, and FBR chairman — will depart for the United States this weekend to attend the IMF-World Bank annual meetings. It is anticipated that the final adjustments to the MEFP, along with the settlement of external financing confirmations, will be completed during these sessions.
Government insiders expressed optimism that the staff-level agreement would be announced soon after the meetings, paving the way for the next tranche of IMF disbursements. “Most of the work has been completed; only two technical tables and verified flood loss data remain to be finalised,” an official said, adding that the delay was procedural rather than political.
Public debt indicators, including fixed and floating interest rates, sukuk maturities, and external debt servicing profiles, remain within agreed targets, easing concerns over fiscal sustainability.
Once the SLA is signed, Pakistan will move closer to unlocking additional external support from multilateral partners and friendly countries, a development seen as vital for stabilising the rupee and rebuilding foreign exchange reserves. The coming week, officials said, will be critical in shaping Pakistan’s fiscal outlook and determining the pace of its economic recovery under the IMF programme.
