Virtual discussions to run May 14–16 as IMF mission delays visit to Islamabad
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are set to begin virtual discussions today (May 14) on the upcoming federal budget, as the IMF team’s planned visit to Islamabad was postponed due to regional security concerns, government sources told The Express Tribune on Tuesday.
Originally scheduled to arrive in Islamabad on May 13, the IMF mission delayed its trip following travel disruptions linked to heightened regional tensions triggered by Indian aggression. Despite the delay, officials clarified that the shift to virtual talks would not impact the program’s timeline or progress.
The initial round of virtual talks will run through May 16. The IMF team is now expected to arrive in Islamabad over the weekend, depending on how the security situation evolves, and will remain in the capital until May 23 for in-person negotiations.
Finance Ministry and IMF representatives did not comment on the change in the travel schedule.
In a significant development, the IMF has appointed Iva Petrova, a Bulgarian economist and former IMF Mission Chief to Armenia, as the new head of its Pakistan mission. She will be joining the discussions alongside outgoing Mission Chief Nathan Porter, who had a low public profile but was known for his firm stance on policy matters.
Petrova holds a PhD in economics from Michigan State University and has worked with IMF missions to Israel, Iceland, and Latvia.
Pakistan plans to present its federal budget for fiscal year 2025–26 on June 2, ahead of the Eidul Azha holidays. This will be Finance Minister Muhammad Aurangzeb’s second budget, which must align with IMF policy guidelines discussed during these talks.
The IMF has called for a tight fiscal policy next year, demanding a primary budget surplus of 1.6% of GDP, or roughly Rs2 trillion above non-interest expenditures. The Federal Board of Revenue (FBR) is expected to set a tax target equivalent to 11% of GDP, or Rs14.3 trillion.
The federal budget’s final size is yet to be determined, pending adjustments to defense spending. Sources suggest the total outlay will remain below Rs18 trillion. After factoring in expected provincial surpluses, the overall budget deficit is projected to be 5.1% of GDP, or Rs6.7 trillion.
On the first day of talks, the Finance Ministry will brief the IMF on fiscal developments from July to March of the current fiscal year and share details about supplementary grants.
Pakistan has so far met key fiscal benchmarks under the IMF program, including the federal primary surplus and provincial cash and revenue targets. The federal government reported a surplus of Rs3.5 trillion—2.8% of GDP—against a target of Rs2.7 trillion, largely due to early booking of Rs2.5 trillion in central bank profits.
Provinces posted a combined cash surplus of Rs1.028 trillion, exceeding the IMF’s target by Rs25 billion. They also surpassed tax revenue expectations, collecting Rs685 billion—Rs79 billion above target. However, the FBR fell short of its nine-month revenue target of Rs9.2 trillion, collecting only Rs8.5 trillion, a shortfall of Rs715 billion.
The IMF has also requested updates on potential savings from government downsizing and projections for non-tax revenue, including petroleum levies and central bank profits.
The FBR will report its April tax collection figures and outline prospects for the remaining fiscal year. The agency now faces a tax shortfall of Rs830 billion for the first ten months, despite new taxes and reduced refunds. April alone saw an additional shortfall of Rs135 billion, pushing the government beyond its IMF-agreed limit of Rs640 billion.
Provisional data shows the FBR has collected Rs9.3 trillion by the end of April—27% or Rs1.95 trillion more than last year—but still not enough to meet the annual target.
Today’s discussions will also address enforcement gaps in key areas like the track-and-trace system, the retailers’ scheme, and compliance risk management. The FBR has underperformed in these initiatives, with much of its revenue growth driven by emergency tax measures rather than structural reforms.
