Pakistan has successfully negotiated with the International Monetary Fund (IMF) to avoid implementing a mini-budget before the end of the fiscal year in June, Finance Ministry officials confirmed Friday as the final round of talks concluded.
The government has received encouraging signals regarding the country’s economic performance, paving the way for the release of a $1 billion tranche under the ongoing $7 billion loan program.
The IMF mission, led by Nathan Porter, held extensive discussions with Finance Minister Muhammad Aurangzeb, reviewing both the economic achievements of the first half of the fiscal year and future policy objectives.
“The Fund has expressed satisfaction with our fiscal management, though they continue to emphasize the need for expanding the tax base,” stated an official.
In what officials describe as a significant breakthrough, the Federal Board of Revenue (FBR) persuaded the IMF to reduce the annual tax revenue target from Rs. 12,970 billion to Rs. 12,370 billion after demonstrating improvements in the tax-to-GDP ratio.
However, the Fund remains adamant about eliminating tax exemptions for wealthy individuals and entities. Large agricultural landowners will likely face agricultural income tax, while major industrialists must pay super tax on high earnings. The IMF delegation has pushed for faster implementation of these taxation measures despite acknowledging recent legislative efforts.
The IMF has particularly emphasized bringing more businesses from the retail, wholesale, real estate, and dealership sectors into the tax net to ensure sustainable revenue generation. Government negotiators proposed reducing tax rates on real estate and property transactions to prevent capital flight and maintain domestic investment.
Privatization featured prominently in the discussions, with the IMF emphasizing accelerated divestment of loss-making state-owned enterprises. The government has already submitted plans to privatize three power distribution companies—Islamabad, Faisalabad, and Gujranwala—in the first phase, with Multan, Lahore, and Hyderabad electric companies scheduled for the second phase. Pakistan International Airlines remains high on the privatization priority list.
The Fund has also insisted on stricter enforcement of the Point of Sale and Track & Trace systems to combat tax evasion, particularly in the retail sector.
As policy discussions conclude, the IMF team will prepare its final review report for presentation to the Fund’s Executive Board, which must approve the release of the next $1 billion installment. Finance Ministry sources indicated that online consultations would continue after the delegation’s departure to address any outstanding issues.
The negotiations are expected to culminate with an Iftar dinner today between the Finance Minister and IMF officials, after which final recommendations will be formulated.
With economic growth projected to exceed 4 percent next fiscal year, inflation expected to remain in single digits, and external financial needs surpassing $20 billion, the government faces the challenge of implementing reforms while maintaining economic stability.
