Pakistan Continues Budget Talks With IMF To Ensure Economic Stability

The IMF chief met with Pakistani leaders to discuss the next fiscal year’s budget.

IMF and Pakistan discuss future budget plans:

The IMF visited Pakistan, but the discussion regarding the next year’s fiscal year is pending. On May 19, the IMF and Pakistan negotiated over the new year’s fiscal plans. The IMF has confirmed that talks will continue in the coming days. Due to these ongoing negotiations, the government has decided to delay the official budget announcement until June 10.

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Focus on revenue and spending:

The IMF’s mission chief for Pakistan, Nathan Porter, described the latest talks with Pakistan as “constructive.” He stated the key points discussed in the meeting. He said that discussions were majorly focused on how Pakistan could raise more revenue. The talks also revolved around broader economic reforms under the ongoing $7 billion Extended Fund Facility (EFF) and the newer Resilience and Sustainability Facility (RSF), which supports climate-related initiatives. Porter noted that Pakistani authorities remain committed to reducing the country’s budget deficit. Their target is a primary surplus of 1.6% of GDP for the next fiscal year, which means more income than expenses.

Reforms beyond the budget:

Reforms are meant to foster the financial stability of the sectors. It cuts down high operational costs. In the meeting, the IMF chief and Pakistan also discussed the reforms in the power sector. The Pakistani government stressed maintaining strong economic policies and building up financial buffers to handle future challenges. The strategic discussions with the IMF chief help the country withstand external economic shocks.

Political engagement and Defence budget concerns:

Shehbaz Sharif and Asif Ali Zardari met the IMF team. The IMF team discussed the defense budget with Finance Minister Muhammad Aurangzeb. However, the meeting has not concluded. Sources say virtual meetings will carry on next week. The coming meeting will focus on finalizing the defense budget and overall development spending, which is currently estimated at Rs 1 trillion.

No immediate fuel price hike:

In order to cope with the RSF requirements, sources confirmed the enforcement of the carbon levy on a number of items. However, in the meeting, there was no plan to increase the petroleum levy rate.The meeting has also focused on the relief for salaried workers and the real estate sector. However, these decisions depend on whether the government can find alternative revenue sources to balance its spending.