IMF staff concludes Pakistan visit, shifts focus to FY26 budget deal
New loan reviews under EFF and RSF scheduled for second half of 2025
- May 24, 2025,
- Updated May 24, 2025 8:44 AM IST
The International Monetary Fund announced on Saturday that it has completed its staff visit to Pakistan and will continue to work with the government to reach an agreement on the authorities’ FY26 budget in the coming days.
The staff visit, led by Nathan Porter, began on May 19 and the findings will be presented to the IMF’s Executive Board. The IMF stated that the next mission associated with the next EFF and RSF reviews is expected in the second half of 2025.
The IMF has been engaging with Pakistan to revive its economy after extending loans as a bailout package, including a $1 billion loan in September 2024 as a 37-month Extended Arrangement under the Extended Fund Facility (EFF). Most recently, the IMF Executive Board approved a $2.4 billion package to Pakistan, including immediate loans of $1 billion and an arrangement under the Resilience and Sustainability Facility (RSF) for $1.4 billion.
The IMF staff visit focused on recent economic developments, program implementation, and the budget strategy for fiscal year (FY) 2026. "We had constructive discussions with the authorities regarding their FY2026 budget proposals, broader economic policy, and reform agenda supported by the 2024 EFF and the 2025 RSF," Porter said in a statement.
Pakistan has postponed the presentation of its federal budget for 2025-26 to June 10 from the original June 2 date. As part of the 11 conditions the IMF has placed on its loan to Pakistan, it has emphasized that the federal budget must align with the IMF loan facility by June 2025. The Pakistani government has reaffirmed its commitment to the IMF for 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 increase revenue, such as improving compliance and expanding the tax base, and prioritizing expenditures. We will continue discussions to finalize the authorities' FY26 budget in the coming days," Porter further stated.
The IMF discussions also addressed ongoing energy sector reforms aimed at improving the financial viability and reducing the high-cost structure of Pakistan's power sector, as well as other structural reforms that will help promote sustainable growth and create a more level playing field for businesses and investments. "The authorities also emphasized their commitment to ensuring sound macroeconomic policy making and building buffers," said the statement, highlighting that for Pakistan, rebuilding foreign exchange reserve buffers, maintaining a fully functional FX market, and allowing greater exchange rate flexibility are essential for enhancing resilience to external shocks.
India had raised objections to the latest IMF loans being provided to Pakistan following the Pahalgam terror attack and during the military conflict with India. Finance Minister Nirmala Sitharaman even spoke to IMF Managing Director Kristalina Georgieva, urging her not to approve the loan.
According to publicly available data, Pakistan spends an average of around 18% of its general budget on defense affairs and services. This percentage is higher than that of conflict-affected countries, which typically spend 10-14% of their general budget on defense. Additionally, Pakistan's arms imports increased dramatically from 1980 to 2023, by over 20% on average in years when the country received IMF disbursements compared to years when it did not.
The International Monetary Fund announced on Saturday that it has completed its staff visit to Pakistan and will continue to work with the government to reach an agreement on the authorities’ FY26 budget in the coming days.
The staff visit, led by Nathan Porter, began on May 19 and the findings will be presented to the IMF’s Executive Board. The IMF stated that the next mission associated with the next EFF and RSF reviews is expected in the second half of 2025.
The IMF has been engaging with Pakistan to revive its economy after extending loans as a bailout package, including a $1 billion loan in September 2024 as a 37-month Extended Arrangement under the Extended Fund Facility (EFF). Most recently, the IMF Executive Board approved a $2.4 billion package to Pakistan, including immediate loans of $1 billion and an arrangement under the Resilience and Sustainability Facility (RSF) for $1.4 billion.
The IMF staff visit focused on recent economic developments, program implementation, and the budget strategy for fiscal year (FY) 2026. "We had constructive discussions with the authorities regarding their FY2026 budget proposals, broader economic policy, and reform agenda supported by the 2024 EFF and the 2025 RSF," Porter said in a statement.
Pakistan has postponed the presentation of its federal budget for 2025-26 to June 10 from the original June 2 date. As part of the 11 conditions the IMF has placed on its loan to Pakistan, it has emphasized that the federal budget must align with the IMF loan facility by June 2025. The Pakistani government has reaffirmed its commitment to the IMF for 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 increase revenue, such as improving compliance and expanding the tax base, and prioritizing expenditures. We will continue discussions to finalize the authorities' FY26 budget in the coming days," Porter further stated.
The IMF discussions also addressed ongoing energy sector reforms aimed at improving the financial viability and reducing the high-cost structure of Pakistan's power sector, as well as other structural reforms that will help promote sustainable growth and create a more level playing field for businesses and investments. "The authorities also emphasized their commitment to ensuring sound macroeconomic policy making and building buffers," said the statement, highlighting that for Pakistan, rebuilding foreign exchange reserve buffers, maintaining a fully functional FX market, and allowing greater exchange rate flexibility are essential for enhancing resilience to external shocks.
India had raised objections to the latest IMF loans being provided to Pakistan following the Pahalgam terror attack and during the military conflict with India. Finance Minister Nirmala Sitharaman even spoke to IMF Managing Director Kristalina Georgieva, urging her not to approve the loan.
According to publicly available data, Pakistan spends an average of around 18% of its general budget on defense affairs and services. This percentage is higher than that of conflict-affected countries, which typically spend 10-14% of their general budget on defense. Additionally, Pakistan's arms imports increased dramatically from 1980 to 2023, by over 20% on average in years when the country received IMF disbursements compared to years when it did not.