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Time of India
24-05-2025
- Business
- Time of India
IMF in 'constructive discussions' with Pakistan over upcoming budget, next review expected in second half of 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. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
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Business Standard
24-05-2025
- Business
- Business Standard
FY26 budget talks with Pakistan 'constructive', to continue ahead: IMF
Pakistan has reiterated its commitment to fiscal consolidation, with a primary budget surplus target of 1.6 per cent of GDP for the 2026 financial year, according to the International Monetary Fund (IMF). The IMF concluded its staff mission to Islamabad, led by Nathan Porter, and confirmed that the next review of Pakistan's funding programme will take place in the second half of 2025. The IMF announced on Saturday that it had engaged in "constructive discussions" with Pakistani authorities regarding the upcoming financial year 2025-26 Budget. Talks began on May 19 in Islamabad but did not reach a conclusion, prompting the government to postpone the federal budget presentation to June 10. In a statement, IMF Mission Chief Nathan Porter said, "We held constructive discussions with the authorities on their FY26 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)." He added, "We will continue discussions towards agreeing over the authorities' FY26 budget over the coming days." The discussions centred on measures to increase revenue through improved tax compliance and base broadening, along with more efficient allocation of public spending. IMF approves $1 billion loan Earlier this month, the IMF's Executive Board approved a $1 billion disbursement under the Extended Fund Facility (EFF), acknowledging that Pakistan had met all performance criteria. The funds are crucial for bolstering Pakistan's foreign exchange reserves and providing a buffer for its fragile economy. The loan approval came despite India's opposition, which cited concerns over potential misuse of multilateral funds for terrorism-related activities. India has reportedly communicated its objections to global financial institutions, arguing that Pakistan could divert aid toward military expenditure and arms procurement. Reforms and conditions intensify under IMF programme The IMF emphasised the importance of continued reforms to enhance fiscal resilience and promote investment. The current discussions focus on actions to boost revenue, prioritise spending, and finalise Pakistan's FY26 Budget. As part of its ongoing bailout programme, the IMF has introduced 11 new structural conditions. These include steps to rebuild foreign exchange reserve buffers, maintain a fully functioning FX market, and allow for greater exchange rate flexibility. The fund also highlighted external risks, warning that US trade policies and rising geopolitical tensions could undermine economic recovery. Fiscal targets and sector reforms According to Porter, the Pakistani authorities reiterated their commitment to fiscal consolidation while maintaining priority and social sector expenditures. The fiscal plan aims for a primary budget surplus of 1.6 per cent of GDP in FY26. Talks also addressed ongoing reforms in the energy sector. These include efforts to improve financial stability and reduce the high cost structure of the power sector. Broader structural reforms were also on the table, aimed at enabling sustainable economic growth and a more competitive environment for business and investment. Macro policy priorities and monetary strategy Porter highlighted Pakistan's focus on strengthening macroeconomic policymaking and enhancing economic resilience. "In this context, maintaining an appropriately tight and data-dependent monetary policy remains a priority to ensure inflation is anchored within the central bank's medium-term target range of 5–7 per cent," he said. Efforts to rebuild foreign exchange reserves, maintain a functional FX market, and allow greater flexibility in the exchange rate were also deemed essential to shielding the economy from external shocks. Next IMF mission set for late 2025 The IMF confirmed that its next mission, related to the upcoming reviews under the EFF and RSF programmes, is scheduled for the second half of 2025. Pakistan entered a ₹7 billion Extended Fund Facility arrangement with the IMF last year and has so far received two disbursements, including one this month. India raises concerns over IMF funding Despite IMF board approval of the financial assistance, the programme faced criticism from India. On May 16, Defence Minister Rajnath Singh urged the IMF to reconsider its support, alleging that the funds might be diverted to finance terrorist activities across the border. India's opposition to Pakistan's IMF funding coincides with heightened border tensions following a terror attack in Pahalgam, which claimed 26 lives. In response, India launched 'Operation Sindoor' on May 7, targeting terror camps in Pakistan and Pakistan-occupied Kashmir (PoK). India has consistently accused Pakistan of sheltering designated terrorists, with recent accusations reinforced by reports of senior Pakistani military officials attending funerals of militants killed in the Indian strikes. A government source told PTI that India intends to push for Pakistan's return to the Financial Action Task Force (FATF) grey list and will oppose future World Bank assistance to Islamabad.
Business Recorder
24-05-2025
- Business
- Business Recorder
IMF, govt to continue FY26 Budget discussions ‘over the coming days'
An International Monetary Fund (IMF) mission led by Nathan Porter concluded its staff visit to Islamabad, which began on May 19, 2025. The staff visit focused on recent economic developments, program implementation, and the budget strategy for fiscal year (FY) 2026, which is scheduled to be announced on June 10, 2025. '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 Porter, in a statement 'The authorities reaffirmed their commitment to fiscal consolidation while safeguarding social and priority expenditures, aiming for a primary surplus of 1.6% of GDP in FY2026. 'Discussions focused on actions to enhance revenue, including by bolstering compliance and expanding the tax base, and prioritize expenditure. We will continue discussions towards agreeing over the authorities' FY26 budget over the coming days,' he said. Agreed EFF conditions: Any deviation could affect future reviews The IMF said discussions also covered ongoing energy sector reforms aimed at improving financial viability and reducing the high-cost structure of Pakistan's power sector. Other structural reforms will help foster sustainable growth and promote a more level playing field for business and investment. Moreover, the authorities also emphasised their commitment to ensuring sound macroeconomic policy-making and building buffers. In this context, maintaining an appropriately tight and data-dependent monetary policy remains a priority to ensure inflation is anchored within the central bank's medium-term target range of 5–7%. Pakistan 'met all targets', received board consensus for fund release: IMF At the same time, rebuilding foreign exchange reserve buffers, preserving a fully functioning FX market, and allowing for greater exchange rate flexibility are critical to strengthening resilience to external shocks. 'The mission thanks the federal and provincial authorities for their hospitality, constructive discussions, and strong collaboration and commitment to sound policies. 'The IMF team will remain engaged and continue its close dialogue with the authorities. The next mission associated with the next EFF and RSF reviews is expected in the second half of 2025,' read the statement.
