IMF concludes staff visit to Pakistan focused on FY26 budget

A staff mission from the International Monetary Fund (IMF), led by Nathan Porter, concluded its visit to Islamabad on Friday after holding discussions on Pakistan’s economic performance, budget strategy for fiscal year 2026, and ongoing reforms under the Fund-supported loan programs.

The mission, which began on May 19, focused on reviewing recent economic developments and implementation of reforms supported by the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

“We held constructive discussions with the authorities on their FY2026 budget proposals and broader economic policy, and reform agenda,” said Porter in a statement at the end of the visit. He said the Pakistani authorities reaffirmed their commitment to fiscal consolidation while protecting social and priority spending, targeting a primary surplus of 1.6% of GDP for FY2026.

Talks centered on increasing revenue through better compliance and tax base expansion, as well as prioritizing expenditures, he added. The IMF said discussions on finalizing the budget strategy will continue in the coming days.

The mission also addressed the government’s progress on energy sector reforms aimed at improving the financial viability of the power sector and lowering its cost structure. Broader structural reforms, the IMF said, are necessary to promote sustainable growth and create a fairer business environment.

Porter emphasized the importance of maintaining tight and data-driven monetary policy to bring inflation within the central bank’s medium-term target range of 5–7%. He also called for efforts to rebuild foreign exchange reserves, preserve a functional foreign exchange market, and allow greater exchange rate flexibility to enhance resilience against external shocks.

The next review mission for the EFF and RSF programs is expected in the second half of 2025.