Pakistan meets most IMF targets but falls short on tax and reforms

Pakistan has achieved the majority of its key economic targets under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) ahead of a scheduled review this month, though shortfalls persist in tax revenue collection and structural reforms, according to data shared by official sources.

The country posted a primary budget surplus of 2.0% of GDP — just below the 2.1% target — but outperformed in nominal terms, recording PKR 2.7 trillion against the target of PKR 2.4 trillion. The overall fiscal deficit stood at 5.4% of GDP, lower than the IMF ceiling of 5.7%, equivalent to PKR 6.2 trillion.

Pakistan also met the IMF’s net international reserves (NIR) floor, with reserves at –US$3.0 billion, above the required –US$3.2 billion. Gross foreign exchange reserves held by the State Bank of Pakistan (SBP) rose to US$14.5 billion, surpassing the US$13.9 billion target.

All Quantitative Performance Criteria (QPCs) — including ceilings on government borrowing from the SBP, net domestic assets of the central bank, and restrictions on foreign exchange practices — were met.

Revenue and provincial gaps

Despite this progress, the Federal Board of Revenue (FBR) missed its tax collection target. The revenue-to-GDP ratio remained below the 12.3% goal, with FBR’s share at just 10.6%, reflecting a major shortfall.

Provincial cash surpluses also failed to materialize, while revenue from the Tajir Dost retail taxation scheme fell short, underscoring challenges in fiscal decentralization and retail tax enforcement.

Slow structural reforms

Progress on structural benchmarks was uneven. Pakistan missed targets to publish a governance and corruption diagnostic report and to approve amendments to the State-Owned Enterprises (SOE) Act aimed at improving public sector governance.

Some reforms, however, were achieved: agricultural income tax legislation was enacted, quarterly SOE financials were published, the FY26 budget was approved in line with IMF requirements, and electricity tariffs were rebased.

Other measures — including gas pricing reforms, the action plan for undercapitalized banks, and the post-2027 financial sector strategy — were only partially implemented. The governance action plan remains at risk, while climate-resilience reforms are still ongoing.

IMF review outlook

The IMF is set to conduct its second semi-annual review of the $7 billion EFF on September 25, covering Pakistan’s performance for the March and June 2025 quarters. Meeting most macroeconomic targets is expected to strengthen Pakistan’s case for continued disbursements.

Still, analysts caution that unresolved tax gaps and lagging governance reforms could raise red flags in the review. With fiscal and reform challenges persisting, policymakers face pressure to sustain momentum and prevent slippages that could put the IMF program at risk in the months ahead.