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Pakistan economic instability and IMF negotiations

Updated 3 times since CLSTR started tracking revisions of this situation.

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2026-10-03 12:38 UTC → 2026-10-04 09:42 UTC · added removed

Pakistan continues to face significant economic instability driven by persistent inflation and rising energy costs. While inflation eased slightly to 10.3 percent in September 2026 from 11.1 percent in August, it remains above government projections. Although food inflation has seen a decline, energy-related inflation has risen, with petrol prices currently 39 percent higher than the previous year. In response to these pressures, the federal government implemented fuel price hikes effective from October 3 to October 5, 2026. During this period, petrol prices increased by Rs2.10 per litre to Rs392.76, and high-speed diesel rose by 30 paisa to Rs399.64 per litre. These domestic challenges coincide with ongoing negotiations between Pakistan and the International Monetary Fund (IMF). The IMF has shared a draft Memorandum of Financial and Economic Policies (MEFP) and expressed concerns regarding the breach of circular debt targets within the power sector. Current discussions sector, which has reached Rs1.675 trillion. Key negotiation points include the recovery of over Rs110 billion in provincial power-sector arrears through National Finance Commission (NFC) share adjustments. Further IMF recommendations involve potential adjustments to structural reforms, such as eliminating cross-subsidies on power usage for up to 200 units and transitioning to targeted subsidies via the Benazir Income Support Programme (BISP) by 2027. Additionally, the IMF has requested technical data on the Draft Auto Policy 2026-31 and projections for urged the removal of the 1% sales tax concession on electric vehicles, suggesting it be raised to 18%. While the IMF has reportedly expressed satisfaction with Prime Minister Shehbaz Sharif’s economic policies and tax collection performance, addressing the circular debt and current account deficit. deficit remains central to the discussions.

Versions

  1. 2026-10-04 09:42 UTC Pakistan economic instability and IMF negotiations
  2. 2026-10-03 12:38 UTC Pakistan economic instability and IMF negotiations
  3. 2026-09-28 07:43 UTC Pakistan economic instability and declining confidence
  4. 2026-09-07 12:52 UTC Pakistan economic instability and declining confidence

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