By Staff Reporter
ISLAMABAD: The International Monetary Fund’s latest mission to Pakistan has ended after a week of discussions with federal and provincial officials, securing fresh commitments to fiscal discipline and structural reforms as the government prepares its budget for fiscal year 2027.
The team, which visited Islamabad from May 13 to May 20, focused on recent economic developments — including the impact of disruptions from the Middle East conflict — reform implementation under the IMF-supported programs, and the budget strategy for the coming year, the fund said in a statement released early Thursday.
Iva Petrova, who led the mission, described the talks as constructive. Authorities reaffirmed their commitment to a primary surplus target of 2% of gross domestic product in FY2027, a level the IMF said will support fiscal sustainability and help build economic resilience. The gradual fiscal consolidation will be underpinned by measures to broaden the tax base, strengthen tax administration, improve spending efficiency and enhance public financial management at both federal and provincial levels.
Discussions on the specifics of the FY2027 budget will continue in the coming days, Petrova said. The IMF has separately targeted federal revenues at 17.145 trillion rupees for the 2026-27 fiscal year, while pressing provinces to lift their own revenue contribution by at least 400 billion rupees — roughly 40% above their current share — through more effective collections in agriculture, property and services.
The State Bank of Pakistan reiterated its pledge to maintain an appropriately tight monetary policy stance to anchor inflation expectations and said it will continue monitoring potential second-round effects from recent energy price increases. Exchange-rate flexibility will remain a key shock absorber, the fund noted, while both sides agreed on the need to deepen the foreign-exchange interbank market.
Talks also covered progress on broader structural reforms aimed at supporting durable growth and attracting high-quality private investment. These include changes in the energy sector and state-owned enterprises, product-market liberalisation, and financial-sector reforms.
Under the Resilience and Sustainability Facility, discussions advanced on adopting a disaster-risk financing framework, integrating climate considerations into budget and investment planning, and pushing ahead with power-subsidy reforms.
The mission thanked federal and provincial authorities for their “constructive engagement, strong collaboration, and continued commitment to sound policies.” A follow-up visit, expected to combine the Article IV consultation with reviews of the Extended Fund Facility and Resilience and Sustainability Facility, is scheduled for the second half of 2026.
The talks come days after the IMF Executive Board completed the third review of Pakistan’s Extended Fund Facility arrangement and the second review of the Resilience and Sustainability Facility. The decision, reached earlier this month, unlocked about $1.1 billion from the EFF and $220 million from the RSF, bringing total disbursements under the two facilities to roughly $4.8 billion. Pakistan is operating under a broader $7 billion IMF-supported program.
In its accompanying staff report, the fund said Pakistan has made “significant progress” under the EFF and RSF arrangements. “Pakistan’s policy efforts under the EFF arrangement have delivered significant progress in stabilising the economy and rebuilding confidence amid a challenging global environment, including the ongoing Middle East war,” it said.
Fiscal performance has been strong, with a primary surplus of 1.6% of GDP on track for the current fiscal year in line with program targets. Growth momentum picked up in the first half of the fiscal year, the current account remained broadly balanced and foreign-exchange reserves rose to about $16 billion by the end of December, exceeding earlier projections and up from $14.5 billion mid-year.
Inflation has increased as higher global commodity prices fed through to domestic energy costs, the report noted, though it described overall price pressures as remaining contained. The program has played a central role in restoring macroeconomic stability, improving market confidence and rebuilding external buffers despite continued global uncertainty.
The IMF stressed that maintaining disciplined policies and accelerating structural reforms will be critical for Pakistan to weather external shocks and secure sustainable long-term growth.
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