Islamabad, 24 May

The International Monetary Fund (IMF) said on Saturday that it held “constructive discussions” with Pakistani authorities on the upcoming budget while committing to continue talks in the coming days.

The IMF team started high-level policy talks in Islamabad on 19 May to discuss the FY 2025-26 budget, which went on for days but apparently were inconclusive, forcing the government to delay the announcement of the budget till 10 June.

“We held constructive discussions with the authorities on their FY2026 budget proposals and broader economic policy, and reform agenda supported by the 2024 Extended Fund Facility (EFF) and the 2025 Resilience and Sustainability Facility (RSF),” the IMF’s mission chief Nathan Porter said in a statement.

“We will continue discussions towards agreeing over the authorities’ FY26 budget over the coming days,” the statement added. 

The current discussions were focused on actions to enhance revenue, including bolstering compliance and expanding the tax base and prioritising expenditure.

“The authorities reaffirmed their commitment to fiscal consolidation while safeguarding social and priority expenditures, aiming for a primary surplus of 1.6 per cent of GDP in FY2026,” Porter said.

He added that talks covered ongoing energy sector reforms aimed at improving financial viability and reducing the high-cost structure of Pakistan’s power sector as well as other structural reforms which will help foster sustainable growth and promote a more level playing field for business and investment.

The government emphasised its commitment to “ensuring sound macroeconomic policy-making and building buffers,” according to the statement.

“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 per cent,” Porter stressed.

“Rebuilding foreign exchange (FX) reserve buffers, preserving a fully functioning FX market, and allowing for greater exchange rate flexibility are critical to strengthening resilience to external shocks,” added Porter.

The IMF also said that its next mission associated with the next EFF and RSF reviews was expected in the second half of 2025.

Pakistan and the IMF signed a USD 7 billion EFF loan last year and the country so far received two tranches, including the second one disbursed this month. 

The IMF executive board approved the fresh assistance to Pakistan notwithstanding New Delhi's apprehensions that the funds could be used for cross-border terrorism.

On 16 May, India's Defence Minister Rajnath Singh pressed the Washington-based global lender to reconsider the financial assistance, saying Islamabad could use a large part of it to fund the terrorist infrastructure.