Pakistan and the International Monetary Fund are finalising the Memorandum of Economic and Fiscal Policies as talks advance in the fourth review of the country's $7 billion Extended Fund Facility and the third review of the Resilience and Sustainability Facility.
The development moves the review beyond the opening technical discussions that began in Karachi on September 23. However, a staff-level agreement has not yet been announced, and the roughly $1.2 billion linked to the two reviews has not been approved for release.
According to Dawn's October 6 reporting, citing informed and official sources, the two sides are finalising the MEFP after covering the substantive parameters of the review. The IMF mission led by Iva Petrova is expected to conclude its visit after the remaining draft exchanges.
Where the IMF review stands now
The current talks cover Pakistan's fourth review under the EFF and third review under the separate RSF. The EFF arrangement was approved in September 2024, while the RSF supports reforms linked to climate resilience.
The latest development does not mean the review process is complete. A staff-level agreement would still need to be reached, followed by approval from the IMF's Executive Board before review-linked financing could be released.
Roughly $1.2 billion is associated with successful completion of the two reviews. Until the required IMF stages are completed, that amount should not be treated as an approved or received disbursement.
Energy reforms remain part of the programme
Energy-sector reform remains an important part of Pakistan's IMF programme. The IMF's April 2026 programme report set an FY27 power-sector circular debt flow target of Rs300 billion, Rs100 billion below the FY26 target.
The same programme framework limited the planned FY27 power subsidy to no more than Rs830 billion, or 0.6% of GDP, while maintaining the broader objective of reducing circular debt pressures and keeping tariffs aligned with cost recovery.
This means the energy component of the current review is better understood as a continuing reform programme rather than a completed resolution of Pakistan's circular debt problem.
Power and gas circular debt are separate challenges
The power and gas sectors should not be treated as a single circular debt figure. Pakistan's published IMF programme contains specific targets for power-sector circular debt, while current reporting points to a separate and continuing gas-sector debt problem.
Dawn reported on October 6 that gas-sector circular debt had reached about Rs3.6 trillion and continued to rise. The figure was reported as including around Rs1.8 trillion in principal payables and a roughly equivalent amount in accrued interest and late-payment surcharges.
The distinction matters because progress against a power-sector target does not by itself establish that the gas-sector debt problem has been resolved.
Targeted electricity subsidies have a January deadline
Another major energy milestone is the planned replacement of the existing budgeted tariff-differential subsidy and cross-subsidy system with a targeted subsidy framework for low-income electricity consumers through the Benazir Income Support Programme.
The IMF programme sets the targeted electricity subsidy reform for end-January 2027. It also states that work is underway to link electricity consumers with the National Socio-Economic Registry, with the technical linkage and validity checks targeted for completion by end-November 2026 before eligibility criteria are determined.
A separate structural benchmark calls for notification of the annual power tariff adjustment by January 15, 2027.
These deadlines show that important parts of the energy reform programme remain ahead rather than having already been completed.
What has changed since the review began
When the IMF mission began the fourth review in September, discussions initially focused on Pakistan's economic performance through the end of June and the programme's fiscal, revenue and structural benchmarks.
The review subsequently moved to Islamabad and has now progressed to the MEFP stage, according to the latest reporting. That is a meaningful step forward in the negotiations, but it should not be confused with the later stages of staff-level agreement, Executive Board approval and disbursement.
The review therefore remains a developing process. The immediate milestone is the conclusion of the current negotiations and any subsequent staff-level agreement. Any financing associated with the review would still depend on completion of the IMF's required approval process.
