Pakistan receives second tranche of IMF funding, to begin budget discussions virtually

Hans India

14-05-2025

Islamabad: Pakistan is scheduled to start virtual discussions with the International Monetary Fund (IMF) on the country's upcoming fiscal budget after the visit of the IMF mission was delayed due to security reasons amid the ongoing tensions between India and Pakistan which have affected flight operations nationwide.
Sources said that the IMF virtual talks holds pivotal value as the country's government will present Pakistan's proposed budget details to the newly-elected IMF mission chief to Pakistan.
"We still hope that the new mission chief would be able to travel to Islamabad over the weekend, which is subject to security situation. However, the adjustment to have the discussion virtually would not affect the work or the original programme schedule," said one official.
Details revealed that the first round of the virtual discussions will start on Wednesday and continue for at least three days.
"Discussions are expected to be held virtually for the first leg. For the second leg of the talks, the IMF team is expected to arrive in Islamabad on Saturday and stay till May 23," a source said.
The IMF discussion on the fiscal budget are happening at a time when Pakistan received its second tranche of funding from the IMF under the Extended Funding Facility (EFF).
Pakistan's State Bank confirmed that it has received Special Drawing Rights (SDR) Rs 760 million ($1.023 billion) as part of the second tranche under the IMF EFF programme, adding that the latest disbursement will be recorded in the country's foreign exchange reserves.
The latest disbursement of IMF's second tranche to Pakistan follows an approval from the IMF Executive Board on May 9. The IMF also cleared a $1.4 billion funding arrangement under the Resilience and Sustainability Facility (RSF) to support Pakistan's climate resilience initiatives during the meeting.
IMF has appointed a new mission chief for Pakistan, Iva Petrova, who is expected to lead the discussions along with the outgoing IMF mission chief Nathan Porter who carried the reputation of being strict on policy issues and kept a hawk eye on Pakistan finance ministry's media policy.
'Pakistan will unveil the budget for fiscal year 2025-26 on June 2, making it the second budget presentation of the sitting finance minister Muhammad Aurangzeb. The factors of the budget have to be in line with the parameters set during the current meetings with the IMF," said a government source, highlighting the critical importance of the IMF budget discussions.
Experts say that the fiscal budget for the year 2025-26 is expected to be another tough one for the government and the people at large.
'Pakistan is expected to formulate the budget on the assumption of having 1.6 per cent of the country's GDP primary budget surplus. This would require the government to generate at least Rs two trillion over and above the non-interest expenses," said economic expert Shahbaz Rana.
"Tax target for the Federal Board of Revenue (FBR) is proposed to be at least 11 per cent of the GDP. IMF will review if the Pakistan government is setting credible and realistic targets and measures to back its new tax targets," he added.
The defence budget is also expected to be increased, while the overall budget to be presented hovers around Rs 18 trillion.
"The overall budget deficit target after incorporating large provincial cash surpluses is projected at 5.1 per cent of the GDP or Rs 6.7 trillion," said Rana.
On the other hand, the IMF has already set multiple pre-conditions, which Pakistan said it has fulfilled despite initial setbacks.
"Pakistan has met the IMF targets for a primary budget surplus by the federal government, as well as net revenue collection and cash surplus targets by the four provinces. This is why the talks with the IMF on the upcoming fiscal budget may not be as tough," Rana said.
"However, the Federal Board of Revenue (FBR) has miserably failed in multiple domains on its enforcement measures in areas including track and trace, compliance risk management and retailers scheme, and has failed in its tax collection drive', Rana added.
Pakistan is hopeful that its past performance and the recent release of the second tranche of IMF, would justify its compliance to the IMF conditions, paving the way to a successful discussion before the fiscal budget in June 2025.