ISLAMABAD – The International Monetary Fund (IMF) and Pakistan failed to reach agreement on budget targets and decided to continue talks towards agreeing over terms of the upcoming budget 2025-26.
An IMF mission led by Mr. Nathan Porter has concluded its staff visit to Islamabad which began on May 19, 2025. The staff visit focused on recent economic developments, program implementation, and the budget strategy for fiscal year (FY) 2026.
Porter, in a statement, said: “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 authorities reaffirmed their commitment to fiscal consolidation while safeguarding social and priority expenditures, aiming for a primary surplus of 1.6 percent of GDP in FY2026. Discussions focused on actions to enhance revenue—including by bolstering compliance and expanding the tax base—and prioritize expenditure. We will continue discussions towards agreeing over the authorities’ FY26 budget over the coming days”.
The bilateral discussions also 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 Pakistani authorities also emphasized their commitment to ensuring sound macroeconomic policy making and building buffers. 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. At the same time, rebuilding foreign exchange reserve buffers, preserving a fully functioning FX market, and allowing for greater exchange rate flexibility are critical to strengthening resilience to external shocks.
The mission thanked the federal and provincial authorities for constructive discussions, and strong collaboration and commitment to sound policies.
The IMF team will remain engaged and continue its close dialogue with the authorities. The next mission associated with the next EFF and RSF reviews is expected in the second half of 2025.
