IMF wraps up Pakistan visit following talks with authorities on reforms, budget

An International Monetary Fund (IMF) mission has wrapped up its visit to Pakistan, engaging in crucial talks with authorities regarding the nation's economic trajectory. The discussions centered on recent economic developments, the fiscal strategy for the upcoming financial year (FY2027), and the ongoing implementation of reforms under Pakistan's IMF-supported programs, including the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

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Constructive discussions were held with authorities on economic developments, including disruptions from the Middle East conflict, the upcoming budget formulation and progress on the reform agenda under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

Led by Iva Petrova, the IMF mission reported 'constructive discussions' that touched upon various economic challenges, including the disruptions caused by the Middle East conflict. A key commitment reaffirmed by Pakistani authorities is the target of a primary surplus of two percent of GDP in FY2027, a move aimed at bolstering fiscal sustainability and resilience. This consolidation is planned through measures such as broadening the tax base, improving tax administration, and enhancing spending efficiency across federal and provincial levels.

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The authorities reaffirmed their commitment to a primary surplus target of two per cent of gross domestic product (GDP) in FY2027, which will support fiscal sustainability and continue to build resilience.

Furthermore, the State Bank of Pakistan (SBP) reiterated its dedication to maintaining a tight monetary policy to control inflation, while emphasizing the continued role of exchange rate flexibility as a shock absorber. The talks also delved into essential structural reforms, encompassing the energy sector, state-owned enterprises, product market liberalization, and financial sector enhancements designed to foster sustainable growth and attract private investment. Progress on the RSF, including disaster risk financing and climate considerations in budgeting, was also reviewed. The IMF mission expressed gratitude for the 'constructive engagement' and 'strong collaboration' from Pakistani authorities, with the next mission anticipated in the latter half of 2026 for Article IV consultations and program reviews.

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The envisaged gradual fiscal consolidation will be supported by efforts to broaden the tax base, improve tax administration, enhance spending efficiency and public financial management at both federal and provincial levels.