IMF Team Wraps Up Visit to Pakistan With Optimistic Notes on 2025-26 Budget

On May 25, an IMF delegation completed their visit to Pakistan following talks with officials about the forthcoming budget, comprehensive economic policies, and reforms as part of the current $7 billion lending arrangement, according to the organization’s statement on Saturday.

The meeting ended several hours following an announcement by the Pakistani government stating they would be postponing the presentation of the Budget for 2025-26 until June 10. This was pushed back from its initial scheduled date of June 2, with numerous observers attributing this change to difficulties faced by officials in setting final fiscal objectives.

The Economic Survey for 2024-25, providing an overview of different economic sectors’ performances during the past financial year, is set to be released on June 9. This announcement comes from the Pakistani finance ministry and precedes the budget presentation by one day.

Discussions between Islamabad and the IMF delegation, headed by Mission Chief Nathan Porter, commenced on May 19. The talks centered around recent economic changes, progress with the IMF programs, and plans for the upcoming fiscal year’s budget strategy.

“Porter stated that the authorities confirmed their dedication to achieving fiscal consolidation while protecting essential spending on social programs and priorities. Their target is to attain a primary surplus of 1.6 percent of GDP for the fiscal year 2026,” according to the IMF report.

The talks centered around steps to increase income—such as improving adherence to regulations and broadening the taxation scope—and deciding on spending priorities. Over the next few days, we will keep discussing with the aim of reaching an agreement on the government’s fiscal year 2026 budget.

This month, the IMF gave approval for the initial assessment of Pakistan’s loan program, which will release a payment of $1 billion. Additionally, they have greenlit a new $1.4 billion loan through the IMF’s climate resilience initiative.

The IMF loan is crucial for Pakistan as it aims to rejuvenate its heavily indebted economy, projected to grow by 2.68 percent by June, approximately one percentage point below the initial forecast made by the government.

The recent country report from the IMF, released last week, highlighted specific structural milestones for Pakistan’s economic reform initiative. Officials stated these were part of the logical sequence following the steps outlined in the Memorandum for Economic and Financial Policies (MEFP), which Pakistan had entered into back in September.

“These targets were not unexpected; they are intentional steps following previous achievements,” said Khurram Schehzad, an advisor to Pakistan’s finance minister, speaking to Arab News recently. He highlighted the parliament’s endorsement of the upcoming budget as a critical move towards reaching a primary surplus equivalent to 2% of GDP by fiscal year 2026-27, aligning with the terms set forth by the IMF staff agreement.

The initial step was the FY25 budget [introduced last June], aiming for a 1.0 percent surplus.

Talks between Pakistani officials and the visiting IMF delegation also addressed current efforts to reform the energy sector, focusing on enhancing financial stability and lowering the high operational costs within Pakistan’s power industry. Additionally, they discussed further structural changes designed to support “lasting economic expansion and create a fairer competitive environment for enterprises and investments,” the lender noted.

Pakistan’s officials highlighted their dedication to maintaining robust macroeconomic policies and building up reserves.

“In this context, maintaining an appropriately tight and data-dependent monetary policy remains a priority to ensure inflation is anchored within the central bank’s medium-term target range of 5-7 percent,” the lender said.

Simultaneously, restoring foreign exchange reserves, maintaining an efficient FX market, and enabling more flexible exchange rates are essential for enhancing resilience against external shocks.

The next IMF mission is expected to visit Pakistan in the second half of 2025 for next reviews its loan program and climate fund facility.