Pakistan on track to complying with all key IMF program conditions: official

Pakistan has been on track to complying with all the key conditions of the International Monetary Fund (IMF) program to secure the next tranche of $1 billion, Advisor to Finance Minister, Khurram Schehzad, said on Wednesday.

Talking to Nukta from Islamabad, he said that some of the key targets have been achieved such as primary balance surplus, provincial surpluses, and provincial growth in revenue collection.

An IMF delegation is scheduled to arrive in the first week of March to review state of economic affairs, functioning of power and distribution companies, privatization of state-run companies, social protection plan, central bank policies, and revenue collection targets.

The revenue collection target for seven months of the current fiscal year was missed by PKR 386 billion while December tax collection was missed by PKR 47 billion.

The government, Khurram said, was taking several initiatives to bolster revenue collection, including amending laws to prevent non-filers from conducting financial transactions, aiming to help broaden tax net.

He added that one of the key conditions that Pakistan had already met was that all four provinces have passed agriculture tax laws, introducing several tax slabs from farm earning.

There are a few hitches but government has been rigorously working on a plan to successfully complete the review.

Cooling inflation

The inflation rate in May 2023 reached to historic peak of 38% but since January 2024 it started to recede.

Inflation rate in seven months of the current fiscal year reached to 6.5% compared with 28.7% of the same period last year. The easing inflation rate provided the State Bank room to cut interest rates. Starting June 2024, the rate has been slashed by 1,000 basis points to 12% — a more than two-year low.

The advisor said the government has been keeping the prices of food and other products directly impacting common man in check.

Economic growth is likely to cross 3% in FY25, up from 2.4% in the preceding year. The State Bank last month said economic activity would gain further traction and real GDP growth would remain in the earlier projected range of 2.5% – 3.5%.

Schehzad noted that current account has been on course and it might be contained within the stipulated government targets. The current account was in surplus of $1.2 billion in six months of the current fiscal year compared with $1.4 billion deficit recorded in the same period corresponding year.

The central bank forecasts the current account to remain balanced, ranging between a surplus and a deficit of 0.5% of GDP for FY25.

The government has been taking a number of steps to reduce expenditure, including right-sizing of the federal government and reforms in pensions energy, SOEs, and civil services, he added.