Islamabad – May 24, 2025: The International Monetary Fund (IMF) announced on Saturday that discussions with Pakistan on the upcoming fiscal year 2025-26 budget will continue in the coming days, following the conclusion of its latest mission visit.
High-level policy talks between Pakistan and the IMF began on May 19 in Islamabad but ended without a conclusive agreement. As a result, the government has postponed its federal budget announcement to June 10.
In a statement, IMF Mission Chief Nathan Porter described the talks as “constructive” and said negotiations would continue to reach consensus on the FY2026 budget. “Discussions focused on enhancing revenue through improved compliance and a broader tax base, while also prioritising expenditure,” he noted.
Porter confirmed that the talks also addressed reforms under the \$7 billion 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 spending, aiming for a primary surplus of 1.6% of GDP in FY2026,” he added.
Key topics included economic performance, budget strategies, and structural reforms, particularly in the energy sector. Discussions emphasized making the power sector financially viable and reducing its high-cost structure to support sustainable growth.
The IMF stressed the importance of maintaining a tight and data-driven monetary policy to contain inflation within the central bank’s target of 5–7%. Porter also highlighted the need to rebuild foreign exchange reserves and allow greater exchange rate flexibility to bolster resilience against external shocks.
The IMF appreciated the government’s cooperation and reaffirmed its commitment to continued engagement. The next formal IMF mission is expected in the second half of 2025 for further EFF and RSF reviews.
According to sources, defence allocations remain a sticking point in budget discussions. The government has ruled out an increase in the petroleum levy for now but is considering a phased carbon levy to meet RSF commitments. Relief for salaried individuals, real estate reforms, and expenditure controls are also under discussion, contingent on the identification of alternative resources.
The revised budget timeline will include a thorough parliamentary debate and committee review to ensure passage before June 30.
Story by Tahir Sherani
