London, United Kingdom – February 20, 2026 – Pakistan’s economic stabilization efforts, undertaken in conjunction with the International Monetary Fund’s (IMF) Extended Fund Facility (EFF), are showing positive results, according to recent statements from the lending agency. The IMF has acknowledged that policy measures implemented by Pakistan have contributed to a more stable economic environment and a renewed sense of confidence, paving the way for potential further financial assistance.
Julie Kozack, Director of the IMF’s Communications Department, highlighted Pakistan’s progress during a weekly press briefing on Thursday, February 19, 2026. Kozack stated that Pakistan’s policy efforts under the EFF “have helped stabilise the economy and rebuild confidence.” This assessment comes as Pakistan seeks to navigate ongoing economic challenges and secure continued support from the IMF. The current EFF arrangement is crucial for Pakistan’s ability to manage its balance of payments and address long-standing structural economic weaknesses.
The IMF’s positive assessment is particularly significant given the complexities of Pakistan’s economic situation. The country has faced persistent current account deficits and balance of payments stress, necessitating external financial assistance. The EFF, designed for countries grappling with such prolonged economic difficulties, provides a framework for medium-term structural reforms aimed at improving economic resilience and fostering sustainable growth. The ongoing program reflects a commitment from both Pakistan and the IMF to address these fundamental issues.
IMF Commends Pakistan’s Fiscal Performance
Kozack specifically praised Pakistan’s fiscal performance, noting a primary fiscal surplus of 1.3 percent of the country’s Gross Domestic Product (GDP). This surplus, she indicated, is “in line with programme targets” set by the IMF. A primary fiscal surplus occurs when a government’s revenue exceeds its spending, excluding interest payments on debt. Achieving this surplus is a key indicator of fiscal discipline and a crucial step towards reducing Pakistan’s debt burden.
Beyond the fiscal surplus, the IMF also observed that headline inflation in Pakistan has been “relatively contained.” Pakistan recorded its first current account surplus in 14 years during fiscal year 2025, a significant achievement that signals an improvement in the country’s external position. A current account surplus means that a country is earning more from its exports and other income than it is spending on imports and other payments. This positive development helps to strengthen Pakistan’s foreign exchange reserves and reduce its reliance on external borrowing.
Upcoming IMF Review and Potential Disbursement
Looking ahead, an IMF staff team is scheduled to visit Pakistan starting February 25, 2026, to conduct the third review under the EFF and the second review under the Resilience and Sustainability Facility (RSF). This review will assess Pakistan’s progress in implementing the agreed-upon reforms and determine whether the country is eligible for further disbursements of funds. The RSF is a complementary IMF facility designed to help countries build resilience to external shocks and promote sustainable growth.
Upon successful completion of the review, Pakistan could receive approximately $1 billion (equivalent to 760 million Special Drawing Rights) under the EFF, along with an additional $200 million under the RSF by the end of April. These funds would provide a much-needed boost to Pakistan’s foreign exchange reserves and support its ongoing economic stabilization efforts. The disbursement is contingent upon the IMF’s assessment of Pakistan’s continued commitment to the reform program.
Governance and Corruption Reforms Under Scrutiny
The IMF is also focusing on governance and corruption issues in Pakistan. Kozack highlighted the IMF’s recent Governance and Corruption Diagnostic report, which proposes reforms aimed at simplifying tax policy, promoting fair competition in public procurement, and enhancing transparency in asset declarations. These reforms are intended to improve the efficiency and accountability of Pakistan’s public sector and create a more favorable environment for investment and economic growth.
The report’s recommendations address key areas of concern regarding corruption and weak governance, which have historically hampered Pakistan’s economic development. By implementing these reforms, Pakistan aims to attract foreign investment, improve its business climate, and strengthen its institutions. The IMF’s emphasis on governance underscores the importance of addressing these issues as part of a comprehensive economic stabilization strategy.
Understanding the Extended Fund Facility (EFF)
The Extended Fund Facility (EFF) is a lending instrument created by the International Monetary Fund (IMF) to provide financial assistance to countries facing prolonged balance of payments problems stemming from structural economic weaknesses. Governed by the IMF as part of the Bretton Woods institutions, the EFF offers repayable loans – not grants – with extended repayment timelines, typically exceeding three years. InsightsIAS provides further detail on the EFF’s structure and purpose.
The primary purpose of the EFF is to facilitate medium-term structural reforms, such as improving tax systems, reducing inflation, and curbing unsustainable fiscal deficits. Disbursements under the EFF are released in tranches, contingent upon periodic reviews of policy implementation by the borrowing country. This ensures that the funds are used effectively and that the country remains committed to the agreed-upon reform program. Eligibility for EFF loans requires persistent current account deficits, deep-rooted governance issues, and a willingness to implement IMF-monitored reforms.
The EFF approval process begins with a request from the country’s government, outlining its economic needs and proposed reforms. IMF staff then negotiate a program based on these proposals, followed by a review and approval by the IMF’s Executive Board. Once approved, funds are disbursed in phases, conditional on the country’s compliance with the reform program. This rigorous process ensures that the EFF funds are used responsibly and contribute to sustainable economic development.
Challenges and Outlook for Pakistan’s Economy
Whereas the IMF’s assessment is encouraging, challenges remain for Pakistan’s economy. A recent revenue shortfall, though believed to be mitigated by a favorable ruling from the Federal Constitutional Court regarding a “super tax,” requires continued attention. The upcoming budget for the fiscal year 2026-27 will be crucial in demonstrating Pakistan’s commitment to fiscal consolidation and sustainable debt management.
The IMF mission led by Iva Petrova, scheduled to visit Pakistan later this month, will play a key role in evaluating the country’s progress and discussing budget proposals. The engagements during the almost two-week visit, concluding on March 11, will be particularly significant as both sides function to establish broad contours for the upcoming budget, with a focus on provincial finances. Successful completion of the review and subsequent disbursement of funds will be vital for sustaining Pakistan’s economic momentum.
The IMF’s continued engagement with Pakistan underscores the importance of international cooperation in addressing complex economic challenges. The EFF provides a framework for Pakistan to implement necessary reforms and build a more resilient and sustainable economy. The coming months will be critical in determining whether Pakistan can maintain its progress and secure its economic future.
The next key date to watch is the completion of the IMF staff review, expected by the end of April, which will determine the disbursement of the next tranche of funding. Readers are encouraged to share their thoughts on Pakistan’s economic situation and the role of the IMF in the comments section below.