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Pakistan and the International Monetary Fund (IMF) have not yet reached a complete consensus on the budget targets for the upcoming fiscal year. However, the IMF has announced that negotiations on the new fiscal year’s budget will continue.
An IMF mission, led by Mr. Nathan Porter, concluded its staff visit to Islamabad, which began on May 19, 2025. The visit focused on recent economic developments, program implementation, and the budget strategy for fiscal year (FY) 2026.
At the end of the visit, Mr. Porter issued a statement, saying, “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 on prioritizing expenditure. We will continue discussions towards agreeing on the authorities’ FY2026 budget over the coming days.”
The discussions also covered ongoing energy sector reforms, aimed at improving financial viability and reducing the high-cost structure of Pakistan’s power sector. Other structural reforms were also addressed, which are expected to foster sustainable growth and promote a more level playing field for business and investment.
The authorities emphasized their commitment to ensuring sound macroeconomic policymaking and building financial buffers. In this context, maintaining an appropriately tight and data-dependent monetary policy remains a priority to ensure that inflation stays 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 foreign exchange market, and allowing for greater exchange rate flexibility are seen as critical to strengthening resilience to external shocks.
The mission expressed its gratitude to the federal and provincial authorities for their hospitality, 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 upcoming EFF and RSF reviews, is expected to take place in the second half of 2025.
