IMF disburses $1.02 bn to Pakistan as virtual budget talks begin

The funds, approved last week by the IMF Executive Board, will be reflected in the country’s foreign exchange reserves for the week ending May 16.

The disbursement came as IMF officials began virtual discussions with Pakistani authorities on the upcoming federal budget.

The IMF mission, which was due to arrive in Islamabad on Tuesday, postponed its visit due to regional security concerns, particularly disruptions to air travel caused by the India-Pakistan conflict.

Government sources said the mission is now expected to travel over the weekend, with in-person talks scheduled from May 18 to 23.

The IMF expressed satisfaction with Pakistan’s economic reform efforts under the EFF programme, citing stabilisation progress despite a difficult global backdrop.

It noted that fiscal performance was robust, with a primary surplus of 2% of GDP recorded in the first half of FY25, keeping Pakistan on course to meet its 2.1% year-end target.

Gross foreign exchange reserves rose to $10.3 billion by the end of April, up from $9.4 billion in August 2024, and are projected to reach $13.9 billion by June 2025.

The IMF has appointed Iva Petrova as its new Mission Chief to Pakistan.

A Bulgarian national with a PhD in economics from Michigan State University, Petrova previously led the IMF’s mission to Armenia and was part of teams for Israel, Iceland, and Latvia.

She will participate in the current round of discussions alongside outgoing chief Nathan Porter, although the IMF has not clarified whether both will attend all sessions.

The ongoing talks are focused on Pakistan’s budget for FY2025–26, set to be unveiled on June 2.

The IMF has proposed a 1.6% primary surplus target, requiring the government to mobilise an additional Rs 2 trillion over non-interest expenditures.

The tax collection target for the Federal Board of Revenue (FBR) is proposed at Rs 14.3 trillion, or 11% of GDP.

Sources said the IMF is keen to assess whether the proposed targets are backed by credible and enforceable measures.

Despite earlier 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—against a target of Rs 2.7 trillion.

It has also met net revenue and provincial cash surplus targets.

However, the final size of the federal budget remains uncertain due to a review of defence allocations.

Government officials expect the budget to remain under Rs 18 trillion, with the overall deficit pegged at 5.1% of GDP or Rs 6.7 trillion.