News Desk:
The International Monetary Fund (IMF) has disbursed a second tranche of $1.023 billion to Pakistan under its Extended Fund Facility (EFF), the State Bank of Pakistan announced on Wednesday. This funding, approved by the IMF Executive Board last week, will be reflected in Pakistan’s foreign exchange reserves for the week ending May 16.
The disbursement coincides with the start of virtual talks between IMF officials and Pakistani authorities regarding the upcoming federal budget. The IMF mission, initially scheduled to visit Islamabad on Tuesday, delayed its trip due to regional security concerns, particularly disruptions in air travel caused by the ongoing India-Pakistan conflict. Sources indicate that the mission is now expected to arrive over the weekend, with face-to-face discussions planned from May 18 to 23.
The IMF expressed approval of Pakistan’s economic reform efforts under the EFF, noting progress in stabilisation despite global challenges. The IMF highlighted Pakistan’s robust fiscal performance, including a primary surplus of 2% of GDP for the first half of FY25, putting the country on track to meet its full-year target of 2.1%.
Pakistan’s foreign exchange reserves rose to $10.3 billion by the end of April, a significant increase from $9.4 billion in August 2024, and are projected to reach $13.9 billion by June 2025.
In a key update, the IMF appointed Iva Petrova as the new Mission Chief to Pakistan. Petrova, a Bulgarian national with a PhD in economics from Michigan State University, previously led the IMF’s mission to Armenia and has contributed to teams focused on Israel, Iceland, and Latvia. She will be joining the ongoing discussions alongside outgoing mission chief Nathan Porter, though it is unclear whether both will attend all sessions.
The primary focus of the ongoing talks is Pakistan’s budget for FY2025–26, which is set to be presented on June 2. The IMF has proposed a target of a 1.6% primary surplus, which would require Pakistan to mobilise an additional Rs 2 trillion in non-interest expenditures. The tax collection target for the Federal Board of Revenue (FBR) is suggested at Rs 14.3 trillion, or 11% of GDP.
Sources indicate that the IMF is keen to ensure the proposed fiscal targets are supported by credible and enforceable measures. Despite previous setbacks, Pakistan has met key IMF performance benchmarks, including a higher-than-expected federal primary surplus of Rs 3.5 trillion (2.8% of GDP), surpassing the target of Rs 2.7 trillion. Additionally, the country has met its net revenue and provincial cash surplus goals.
However, the final size of the federal budget remains uncertain, with discussions still ongoing regarding defense allocations. Government officials anticipate the budget will stay under Rs 18 trillion, with an overall deficit projected at 5.1% of GDP, or Rs 6.7 trillion.
