Economic developments: IMF speaks of constructive talks with govt

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) will continue talks on the fiscal year 2027 budget in the coming days as the Fund pushed for gradual fiscal consolidation through broader taxation, stronger tax administration and tighter spending controls at both federal and provincial levels.

An IMF mission led by Iva Petrova has concluded its staff visit to Islamabad between May 13 to 20, 2026. The staff visit focused on recent economic developments, reform implementation, and the budget strategy for fiscal year (FY) 2027.

At the end of the visit, Petrova issued the following statement:

“We had constructive discussions with the authorities on recent economic developments, including the impact of ongoing disruptions from the conflict in the Middle East, the FY2027 budget formulation, and progress on the reform agenda under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

READ MORE: Budget talks with IMF may continue

The authorities reaffirmed their commitment to a primary surplus target of 2 percent of GDP in FY2027, which will support fiscal sustainability and continue to build resilience.

The envisaged gradual fiscal consolidation will be supported by efforts to broaden the tax base, improve tax administration, enhance spending efficiency and public financial management at both federal and provincial levels. Discussions on the FY2027 budget will continue in the coming days.

The State Bank of Pakistan reiterated its commitment to maintaining an appropriately tight monetary policy stance to anchor inflation expectations and will continue to closely monitor potential second-round effects from energy price increases.

Furthermore, exchange rate flexibility should continue to serve as a key shock absorber, and efforts should continue to build a deeper foreign exchange interbank market.

Discussions also covered ongoing structural reforms, including in the energy sector and state-owned enterprises, product market liberalization, and financial sector reforms aimed at supporting durable growth and attracting high-quality private investment. Progress under the RSF was also discussed, including efforts to adopt a disaster risk financing framework, integrate climate considerations into budget and investment planning, and advance power subsidy reforms.

The mission thanks the federal and provincial authorities for their constructive engagement, strong collaboration, and continued commitment to sound policies.

The next mission, which is envisioned to include the Article IV consultation and EFF and RSF reviews, is expected to take place in the second half of 2026”, it added.

Copyright Business Recorder, 2026