• Both parties to continue discussions on income, defense, development, tariff reforms
• Next review probably in the second half of 2025
• Mission thanks to federal and provincial authorities for its constructive commitment
Islamabad: In a significant development, the International Monetary Fund (IMF) and the Pakistani authorities have reached a preliminary agreement on a comprehensive financial framework, racing the way for continuous negotiations on the budget for fiscal year 2025-26.
The officials of the Ministry of Finance indicate that discussions will advance in the next few days, with the aim of completing crucial fiscal policies, including the objective of income collection for fiscal year 26, the disbursement of development, defense expense and the rationalization plan highly discussed for the industry.
The areas where the agreements remain pending include tax concessions for the wage class, an increase in the defense budget and the policies related to real estate. The discussions will also focus on reducing expenses, as well as continuous reforms, including the privatization of state companies.
According to an IMF announcement, the background mission, directed by Nathan Porter, has concluded his visit to Islamabad. The visit of the staff focused on recent economic developments, implementation of the program and the budget strategy for fiscal year 26.
The IMF delegation arrived in Islamabad on May 19 to review the recent economic developments of Pakistan, evaluate progress under the installation of extended funds (EFF) and the Center for Resilience and Sustainability of 2025 (RSF) and initiate discussions about the next federal budget.
“We made constructive discussions with the authorities on their budget proposals for the fiscal year26 and a broader reform and policy agenda of the FY26, with the support of 2024 EFF and the RSF 2025,” Nathan said.
The next mission, associated with the upcoming EFF and RSF reviews, is expected in the second half of 2025.
The officials of the Ministry of Finance reaffirmed their commitment to fiscal consolidation while saving social and priority expenses, with the objective of a primary surplus of 1.6 percent of the gross domestic product in the 2016 fiscal year.
It was stated that during the visit to the mission, the discussions focused on actions to improve income, including compliance with compliance and the expansion of the tax base, and in prioritizing expenses.
The Federal Income Board (FBR) faces important deficits in the current fiscal year.
“We will discuss a realistic income objective for the FBR while we keep the view of the growth and inflation of real GDP,” fiscal officials said, adding that the objective of next year will be based on the real income potential instead of establishing an unrealistic objective.
“We will continue the discussions to agree on the 2016 fiscal year budget of the authorities in the coming days,” Nathan said.
He added that discussions also covered current reforms of the energy sector with the aim of improving financial viability and reducing the high -cost structure of the Pakistan electricity sector, along with other structural reforms to promote sustainable growth and promote a more leveling playing field for business and investment.
Nathan also said that the Pakistani authorities emphasized their commitment to guarantee a formulation of solid macroeconomic policies and build financial dampers. In this context, maintaining an adequately adjusted and dependent monetary policy remains a priority to anchor inflation within the medium-term target range of the central bank of 5-7pc.
At the same time, the reconstruction of currency reserves, the preservation of a full -acting currency market and allowing greater flexibility of the exchange rate are considered critical to strengthen resistance against external shocks.
The mission thanked the federal and provincial authorities for their hospitality, constructive discussions and a strong collaboration and commitment to solid policies. The announcement said that the IMF team will remain committed and continue its close dialogue with the authorities.
Posted in Dawn, on May 25, 2025
