Pakistan-IMF Budget Negotiations Ongoing as Full Consensus Remains Elusive

Pakistan and the International Monetary Fund (IMF) have not yet reached a complete agreement on the upcoming fiscal year 2025 budget targets. However, both sides have committed to continue talks in the coming days to finalize budgetary and economic reforms. The IMF delegation, led by Nathan Porter, concluded its visit to Pakistan after a series of constructive discussions with government officials.

The talks, which began virtually on May 15 and continued in person from May 19, focused on Pakistan’s current economic outlook, implementation of the loan program, and fiscal goals for the new budget. The IMF acknowledged Pakistan’s renewed commitment to financial stability and protection of social spending. Both sides agreed on a target to achieve a primary budget surplus of 1.6% of GDP in the next fiscal year.

The IMF emphasized the urgent need to expand the country’s tax base, enhance revenue collection, and prioritize efficient expenditure management. Energy sector reforms were also discussed, with a strong push for reducing power generation costs. The IMF urged Pakistan to sustain a tight monetary policy aimed at controlling inflation within the 5% to 7% range.

Discussions also addressed foreign exchange reserves, with the IMF stressing the importance of maintaining a flexible exchange rate and a functioning forex market. Additionally, the IMF called on Pakistan to improve provincial revenue streams, reduce provincial expenditures, and implement mechanisms for agricultural income tax collection.

While the Pakistani government requested tax relief in specific sectors, including for salaried individuals and the real estate industry, the IMF responded that any exemptions must be supported by detailed data and a clear strategy. No formal conditions have been finalized, but Pakistani authorities have submitted relevant economic data for review.

Both sides have agreed to continue working closely to finalize the FY2025 budget framework and support Pakistan’s economic recovery.