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The review talks between Pakistan and the International Monetary Fund (IMF) have commenced, focusing on the $7 billion loan program. These discussions, which are the first review under this agreement, will take place in two phases.
The initial phase will consist of technical-level talks, during which Pakistan and the IMF will also discuss climate financing. If the review is successful, Pakistan is expected to receive the next installment of approximately $1 billion.
Sources indicate that the negotiations are expected to continue until March 14, with a decision on approximately $1 billion in climate financing also anticipated. The IMF delegation will be led by Mission Chief Nathan Porter, while the second phase of the talks will involve policy-level discussions.
During this stage, Pakistan will present its report on the progress made in fulfilling the conditions of the $7 billion loan program. Additionally, Pakistan will present a report on the first half of the current fiscal year. The IMF delegation is scheduled to meet with officials from the Ministry of Finance, the Federal Board of Revenue (FBR), and the State Bank of Pakistan.
The IMF team will also hold discussions with officials from the Power Division and the National Electric Power Regulatory Authority (NEPRA) and will meet with provincial authorities. It is worth noting that on July 13 of the previous year, Pakistan and the IMF reached a staff-level agreement on the $7 billion loan program, which has a duration of 37 months.
In its statement regarding the loan program, the IMF emphasized that the new program would help Pakistan achieve macroeconomic stability and resilience, creating conditions for more inclusive and flexible growth. The IMF also outlined that Pakistan would increase its tax revenue by 1.5% of GDP in the current fiscal year, with a target of boosting tax collections to 3% of GDP by the end of the loan program. Moreover, Pakistan is required to meet the budget’s approved target of achieving a 1% primary surplus.
The IMF has also stated that there will be a fair increase in both direct and indirect taxes, and the agriculture, retail, and export sectors must be brought into the tax net.
However, Pakistan has faced challenges in meeting some of the IMF’s key conditions. Reports suggest that the FBR has not been able to achieve the tax target of Rs 6,008 billion, and the government is expected to request flexibility from the IMF on this matter. Additionally, efforts are underway to seek relaxation on the delay in tax collection on agricultural income, and the proposal to increase the petroleum levy to 70 rupees per liter is under consideration.
Pakistan has completed the legislation on taxes related to agricultural income, but the IMF is still seeking further reductions in electricity and gas subsidies. Further measures to reduce the budget deficit are anticipated. Sources also indicate that Pakistan will present a report on its implementation of the conditions outlined in the $7 billion loan program, including a report on the first half of the current fiscal year. Additionally, Pakistan will brief the IMF on taxes related to the property sector and the implementation of efforts to bring retailers into the tax net.
Following the negotiations, the IMF delegation will compile recommendations regarding the release of $1.1 billion to Pakistan. A detailed review of Pakistan’s economic stability will be carried out. These talks will take place in two phases: technical and policy-level discussions.
In a separate development, the IMF delegation has also held talks with the Chairman of the FBR, Rashid Langrial. During these discussions, a briefing was provided on the audit operations of the FBR. The IMF has called for improvements in the FBR’s audit system.
Furthermore, sources have indicated that a delegation led by the Secretary of Finance will meet with IMF officials as part of these negotiations. The talks are expected to last for two weeks. Nathan Porter will lead the IMF delegation, while Pakistan’s delegation will be headed by Finance Minister Mohammad Aurangzeb.
