The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan that could unlock about $1.21 billion (roughly €1 billion) in financing, the lender said on Wednesday, as the South Asian country grapples with spiking food and fuel prices, and high unemployment.

The bailout deal still needs to be approved by the IMF Executive Board.

IMF negotiator Iva Petrova said Pakistan had successfully navigated the impact of the Middle East conflict, with strong policies helping preserve macroeconomic stability.

How does the Middle East conflict impact Pakistan?
Pakistan's economy grew 4% in the first three quarters of fiscal 2026 with full-year growth estimated at 3.6%, the IMF said.

Petrova attributed the weakened momentum to "higher energy prices and supply disruptions."

Inflation eased to about 10.3% in September after peaking in May, while core inflation remained contained, Petrova said.

Pakistan remains dependent on external financing to shore up foreign exchange reserves and meet debt repayments.

A prolonged Middle East conflict makes it particularly vulnerable due to its dependence on Gulf energy imports, remittances and financing from the region, according to S&P Global Market Intelligence economist Ahmad Mobeen earlier this year.

In the recent past, Pakistan has had to turn to the IMF to tackle Islamabad's acute balance-of-payments crisis.