IMF team arrives for key review as Pakistan eyes $1.2 billion

An International Monetary Fund (IMF) delegation is set to arrive in Pakistan today for a review of the country’s economic performance under its ongoing loan programs, officials said.

The talks will formally begin Feb. 26 in Islamabad, where Pakistani authorities will brief the IMF team on economic performance from July through January, according to officials familiar with the matter.

The visit, scheduled from Feb. 25 to March 11, will include the third economic review under the Extended Fund Facility (EFF). A successful review could unlock a fourth tranche of about $1 billion for Pakistan under the program.

Negotiations will also cover the second economic review under the Resilience and Sustainability Facility (RSF), which focuses on climate-related reforms. If the talks succeed, Pakistan could receive about $200 million under the RSF program.

Technical sessions and economic targets

In the first phase of discussions, officials from the Finance Ministry and the State Bank of Pakistan will hold technical data-sharing sessions with the IMF team.

Central bank experts are expected to brief the delegation on monetary policy, inflation, banking regulations, the policy rate, and measures related to anti-money laundering and counterterrorism financing.

Discussions will also focus on foreign exchange reserves. The IMF has set a target for Pakistan’s net international reserves to reach $17.8 billion by June 30. For the next fiscal year, the IMF projects net reserves at $23.3 billion, officials said.

During the technical sessions, both sides will review multiple targets for the first half of the current fiscal year, from July to December.

Officials said Pakistan posted a primary budget surplus of PKR 4.105 trillion during the July-December period. The country’s current account deficit is projected at negative 0.6% of gross domestic product for the ongoing fiscal year.

Authorities expect to reach a staff-level agreement with the IMF before the announcement of the next federal budget, potentially paving the way for an additional $1.2 billion in disbursements.

Tax revenue and fiscal measures

Separately, the Federal Board of Revenue has accelerated preparations for the talks.

Officials said Pakistan has achieved most of the IMF’s targets so far. However, revenue collection remains a key issue in discussions between the two sides.

Prime Minister Shehbaz Sharif has directed the tax authority not to impose new taxes before June 30, the end of the fiscal year, and to meet revenue targets without introducing a mini-budget, officials said.

The FBR will seek to revise its annual tax collection target downward by PKR 50 billion to PKR 100 billion, from PKR 13.979 trillion to about PKR 13.879 trillion.

From July through January, the FBR collected PKR 7.147 trillion against a target of PKR 7.521 trillion, resulting in a shortfall of PKR 372 billion, officials said.

A special session with the IMF will focus on tax collection performance in light of inflation and economic growth trends. Officials said they expect to collect PKR 217 billion from the Super Tax during the current fiscal year.

The FBR also anticipates an increase in sales tax revenue due to higher consumer spending during the Eid holiday shopping season, officials said.