IMF says Pakistan met most benchmarks but missed key structural and fiscal goals

Pakistan missed several structural and fiscal targets under its International Monetary Fund program, although most benchmarks were met, according to the Fund’s latest country report.

The findings show uneven progress on structural benchmarks, indicative targets and quantitative performance criteria for the period ending June, highlighting delays in legislation, sector-specific exemptions and persistent fiscal pressures.

Key structural benchmarks missed

The IMF said Pakistan failed to meet the benchmark requiring amendments to laws governing remaining statutory state-owned enterprises, citing delays in the legislative process. The deadline has been proposed for a reset to end-August 2026.

A continuous benchmark on avoiding new tax exemptions was also breached after the government granted exemptions on sugar imports. The IMF said authorities have committed to deregulating the sugar sector by end-June 2026 to avoid further distortions.

Another benchmark — preparation of a plan to phase out Special Economic Zones — was initially missed but “subsequently implemented in October ,” the report said.

Authorities also missed several end-June indicative targets, including minimum spending floors for general government health and education, net tax revenues collected by the Federal Board of Revenue, ceilings on provincial primary budget deficits, and limits on the net accumulation of tax refund arrears.

The IMF said the benchmark on introducing an excise duty on fertilizer and pesticides was missed as well. Authorities argued the measure risked placing heavy burdens on the agriculture sector amid reforms and recent floods. The duty will now be treated as a contingency if revenues fall short.

Benchmarks met

The report noted that Pakistan met eight of 13 structural benchmarks, including passage of an FY26 budget aligned with program requirements, implementation of a new agricultural income tax, and amendments to the Civil Servants Act to strengthen asset declarations by public officials.

Two continuous targets — avoiding parliamentary approval for non-budgeted expenditures and keeping within the cap on the interbank-open market exchange rate premium — were also achieved.

Authorities met four end-June indicative targets, including maintaining minimum maturity levels for domestic debt, increasing consolidated provincial tax revenues, improving FBR income tax collection from retailers and adhering to a ceiling on power-sector payment arrears.

The IMF confirmed that both reform measures under the first Resilience and Sustainability Facility review were completed. These include adoption of a carbon levy, an electric-vehicle subsidy and a tax on conventional internal combustion engine vehicles under the FY26 finance bill.

Quantitative targets mostly met

Pakistan met six of seven quantitative performance criteria, including targets for net international reserves, net domestic assets of the State Bank, limits on government guarantees, the primary budget deficit, net foreign-currency swap and forward positions, and the number of new tax filers.

However, the government narrowly missed the floor for Benazir Income Support Program spending by PKR 463 million, or 0.1%, due to savings in administrative costs. Core social-protection spending exceeded expectations, the IMF noted.

The IMF said Pakistan’s reform progress is advancing but remains vulnerable to legislative delays, sector-specific pressures and fiscal slippages at both federal and provincial levels. Economists cited the need for stronger coordination across government tiers.

“The authorities’ ability to sustain momentum on tax reforms and expenditure discipline will be critical heading into FY26,” the report said.

The Fund warned that upcoming phases of SOE restructuring, subsidy rationalization and revenue mobilization will require “strong political commitment” to avoid further delays and maintain macroeconomic stability.