ISLAMABAD — The International Monetary Fund (IMF) and Pakistani economic authorities have commenced detailed reviews of the draft Memorandum of Financial and Economic Policies (MEFP) for the fourth review under Pakistan’s $7 billion Extended Fund Facility (EFF).
According to Finance Ministry sources, the draft document lays out agreed macroeconomic benchmarks, structural reform conditionalities, and external financing assurances required to successfully conclude the quarterly staff-level evaluation and release the next financing tranche.
Power Sector Circular Debt and Fiscal Targets
A primary focal point of the ongoing technical negotiations involves the energy sector circular debt, which reached approximately Rs 1,675 billion at the close of June 2026, slightly overshooting preliminary program benchmarks. The IMF mission has urged the government to strictly adhere to quarterly power tariff adjustments, aggressive collection drives against default-prone distribution feeders, and phased privatization of state-owned power distribution companies (DISCOs).
These fiscal consolidation efforts come at a crucial juncture for the national economy, closely following reports that Pakistan CPI inflation dropped to 10.3 percent in September 2026, providing modest monetary breathing space for consumers and industrial borrowers.
Current Account Projections and Structural Reforms
Negotiators are also reconciling balance of payments trajectories for the upcoming fiscal years. While federal economic planners have projected an annual current account deficit of roughly $2.7 billion, Fund economists are proposing a more conservative buffer reaching up to $4.0 billion for FY27 to account for global commodity price swings and trade liberalization measures.
The Federal Board of Revenue (FBR) and the Ministry of Energy are finalizing responsive policy annexures before formal signing of the revised MEFP. Government officials remain confident that disciplined implementation of revenue mobilization measures and utility cost rationalization will secure smooth executive board approval in Washington.