The International Monetary Fund (IMF) announced on Saturday that it will continue discussions in the coming days regarding Pakistan’s federal budget for the next fiscal year, following the conclusion of its mission’s visit.
High-level policy talks between Pakistan and the IMF began in Islamabad on May 19, focused on the FY2025-26 budget. As the discussions have not yet reached a conclusion, the government has delayed the budget announcement until June 10.
In a statement, IMF mission chief Nathan Porter described the talks as “constructive” and confirmed that discussions on Pakistan’s FY2026 budget will continue in the coming days.
He said the discussions covered measures to increase revenue — particularly through improved compliance and tax base expansion — while also prioritising spending.
“We held constructive discussions with the authorities on their FY2026 budget proposals and broader economic and reform plans, supported by the 2024 Extended Fund Facility (EFF) and the 2025 Resilience and Sustainability Facility (RSF),” Porter stated, referencing the $7 billion loan programme and climate-focused fund.
He added that Pakistani authorities reaffirmed their commitment to fiscal consolidation while protecting social and priority spending, targeting a primary surplus of 1.6% of GDP for FY2026.
The IMF noted that the staff’s visit focused on recent economic developments, programme progress, and budget planning for FY2025-26.
Porter highlighted that the discussions also included reforms in the energy sector to improve financial sustainability and reduce the high costs of Pakistan’s power sector. Broader structural reforms were also discussed to encourage sustainable growth and a more competitive business environment.
The government, according to the IMF, reiterated its commitment to sound macroeconomic policies and to building fiscal buffers.
“Maintaining a tight, data-driven monetary policy is a priority to keep inflation within the central bank’s medium-term target range of 5–7%,” Porter stressed.
He also pointed out the importance of rebuilding foreign exchange reserves, ensuring a functional foreign exchange market, and promoting greater flexibility in the exchange rate to strengthen resilience against external shocks.
The IMF team thanked federal and provincial authorities for their “hospitality, constructive dialogue, and strong cooperation and commitment to sound policies.”
The IMF will maintain close dialogue with Pakistani authorities and said its next mission for the EFF and RSF reviews is expected in the second half of 2025.
Budget Considerations
During the staff visit, the IMF mission held multiple rounds of discussions on Friday, including a final meeting with Finance Minister Muhammad Aurangzeb, according to informed sources.
An IMF delegation, led by Jihad Azour, director of the Middle East and Central Asia Department, also met with Prime Minister Shehbaz Sharif on Thursday and President Asif Ali Zardari on Friday.
Sources noted that while discussions continued late into the evening between the Federal Board of Revenue and the IMF staff, the budgetary impact of next year’s defence spending had yet to be settled before the meeting with Aurangzeb.
Negotiations will continue virtually over the next week, focusing on finalising the defence budget and other revenue and expenditure estimates, including the Rs1 trillion federal public sector development programme.
Sources also indicated that there are no plans to increase the petroleum levy for now. However, a new carbon levy will be introduced on various items, starting at about Rs3 per litre and rising to Rs5 in the second year, to meet RSF requirements.
Relief measures for salaried workers, real estate, and expenditure controls have been discussed with the IMF but will depend on an alternative revenue plan to be put forward by the government, as fiscal consolidation remains a core part of next year’s budget strategy.
Once announced, the budget will be followed by a thorough debate in parliament, with standing committees on finance reviewing the proposals and providing input before final passage by both houses, all well ahead of June 30.
