IMF in 'constructive discussions' with Pakistan over upcoming budget, next review expected in second half of 2025

Time of India

24-05-2025

The
International Monetary Fund
said that it was in talks with Pakistan, holding 'constructive discussions' focused on the FY2025-26 budget and key economic reforms. The IMF team began high-level policy talks on 19 May in Islamabad and are expected to continue in the coming days.
However, with no final agreement reached, its government pushed back the announcement of the budget to 10 June.
The negotiations are part of Pakistan's ongoing efforts to secure continued support under the IMF's loan arrangements.
'We held constructive discussions with the authorities on their FY2026 budget proposals and broader economic policy, and reform agenda supported by the 2024 Extended Fund Facility (EFF) and the 2025 Resilience and Sustainability Facility (RSF),' said Nathan Porter, the IMF's mission chief, in a statement quoted by PTI.
The current round of talks revolved around revenue enhancement, including better tax compliance and expanding the tax base, alongside prioritising expenditure.
"The authorities reaffirmed their commitment to fiscal consolidation while safeguarding social and priority expenditures, aiming for a primary surplus of 1.6 per cent of GDP in FY2026," Porter said.
Highlights of the discussions
Energy and sustainability:
Energy sector reform was high on the agenda.
Porter said that these discussions aimed towards reducing the cost structure of Pakistan's power sector and improving its financial stability, moves seen as vital to economic sustainability and investor confidence.
Need for macroeconomic structure:
The IMF highlighted the importance of a sound macroeconomic framework, saying that maintaining an 'appropriately tight and data-dependent monetary policy remains a priority to ensure inflation is maintained within the bank's medium-term target range of 5–7 per cent.
Forex restructure:
Porter also raised the need to rebuild the country's foreign exchange reserves and support a fully functioning exchange rate market. Rebuilding foreign exchange reserves, maintaining a well-functioning forex market and increasing exchange rate flexibility are essential for boosting resilience against external shocks, he said.
The IMF said its next mission to Pakistan, as part of the upcoming EFF and RSF reviews, is expected in the second half of 2025.
Pakistan signed a $7 billion extended fund facility with the IMF last year and has received two tranches so far, including the most recent disbursal earlier this month.
The approval came despite objections from India's objections that the funds may be diverted to finance cross border terrorism. On 16 May, defence minister Rajnath Singh urged the IMF to rethink the support, claiming that the funds could be diverted by Islamabad to boost its terror activities.
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