IMF reviews Pakistan's reform commitments, budget strategy
Washington, May 21
The International Monetary Fund has said its staff mission had held "constructive discussions" with Pakistani authorities on the country's economic situation, including the fallout from the ongoing conflict in the Middle East, while reviewing Islamabad's reform commitments and budget strategy for fiscal year 2027.
An IMF mission led by Iva Petrova visited Islamabad from May 13 to 20. The talks focused on recent economic developments, implementation of reforms, and the formulation of Pakistan's next federal budget, a media release said on Wednesday (US time).
"We had constructive discussions with the authorities on recent economic developments, including the impact of ongoing disruptions from the conflict in the Middle East, the FY2027 budget formulation, and progress on the reform agenda under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF)," Petrova said in a statement issued after the visit.
The IMF said Pakistani authorities had "reaffirmed their commitment to a primary surplus target of 2 per cent of GDP in FY2027", describing the target as necessary to support fiscal sustainability and economic resilience.
According to the statement, the planned fiscal consolidation would be backed by efforts to "broaden the tax base, improve tax administration, enhance spending efficiency and public financial management at both federal and provincial levels".
The IMF said discussions on Pakistan's FY2027 budget would continue in the coming days.
The statement also underlined concerns over inflation and energy prices amid regional instability.
"The State Bank of Pakistan reiterated its commitment to maintaining an appropriately tight monetary policy stance to anchor inflation expectations and will continue to closely monitor potential second-round effects from energy price increases," Petrova said.
The IMF added that exchange rate flexibility should continue to play a stabilising role for Pakistan's economy.
"Exchange rate flexibility should continue to serve as a key shock absorber, and efforts should continue to build a deeper foreign exchange interbank market," the statement said.
The talks also covered a broad set of structural reforms, including Pakistan's energy sector, state-owned enterprises, product market liberalisation, and financial sector reforms aimed at encouraging long-term private investment.
The IMF said progress under the Resilience and Sustainability Facility was also reviewed, including work on a disaster risk financing framework, integrating climate priorities into budget planning, and reforms related to power subsidies.
The IMF said its next mission to Pakistan, expected in the second half of 2026, would likely include the Article IV consultation along with reviews under both the EFF and RSF programmes.
— IANS
Reader Comments
Sad to see a neighbour in such a mess. The Middle East conflict is affecting everyone, but Pakistan's structural issues run deeper. The IMF is right to push for tax base expansion — their tax-to-GDP ratio is abysmal. Meanwhile, India is surging ahead with reforms and growth. Hope Pakistan gets its act together for the sake of the people who are bearing the brunt of inflation and energy prices. 🙏
Good to see the IMF pushing for exchange rate flexibility and a deeper forex market. Pakistan's managed float has been a disaster — it just masks the true value of the rupee. And the energy sector reforms are long overdue. Those circular debt issues are like a cancer. But I wonder if the political will exists to implement these reforms, especially before an election year. India faced similar IMF conditions in 1991 and look where we are now. It's painful but necessary.
Interesting to see the IMF focusing on climate priorities and disaster risk financing in Pakistan. That's a new dimension — linking climate resilience with fiscal sustainability. The RSF program could actually be a game-changer if implemented properly. But let's be real: Pakistan's track record on reform implementation is patchy at best. The next review in 2026 will be telling. As someone who follows South Asian economies, I'm cautiously pessimistic.
The 2% primary surplus target is no joke. That means cutting subsidies and raising taxes — both politically toxic moves in any country. India has struggled with fiscal consolidation too, but at least our growth momentum gives us some cushion. For Pakistan, it's a double whammy: slow growth AND austerity. The IMF should also look at the military's economic footprint — that's the elephant in the room. Without addressing that, no amount of reforms will work.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.