Pakistan has fallen short of a crucial requirement set by the International Monetary Fund (IMF), failing to achieve the Rs. 342 billion cash surplus target from its provincial governments in the first quarter of the current fiscal year. This shortfall is primarily attributed to Punjab’s reduced contribution, which significantly impacted the overall provincial surplus.
According to preliminary federal data, the combined provincial surplus amounted to Rs. 160 billion, falling short by Rs. 182 billion, or 53 percent, of the IMF’s benchmark. This raises concerns about Pakistan’s ability to meet the conditions of its $7 billion IMF Extended Fund Facility (EFF), as reported by the Express Tribune.
Under the current IMF agreement, provinces are expected to generate a cash surplus of Rs. 1.217 trillion for the fiscal year, with Rs. 342 billion anticipated for the first quarter. Punjab’s decision to reduce its commercial debt on commodities played a significant role in the shortfall, pushing the cumulative figures below the required threshold.
Despite this setback, provinces exceeded their tax collection target, gathering Rs. 213 billion from July to September, surpassing the IMF’s goal of Rs. 184 billion. This achievement is part of approximately 40 conditions Pakistan agreed to in exchange for the IMF deal, which aims to implement structural fiscal reforms at both federal and provincial levels.
The shortfall highlights the challenges facing Pakistan’s National Fiscal Pact, where provinces committed to improving fiscal performance and generating cash surpluses. With spending increasing by 33% year-on-year in the first quarter, mainly due to higher current expenditures, meeting these surplus targets may prove difficult. Neither Punjab Finance Secretary Mujahid Sherdil nor Finance Ministry spokesperson Qumar Abbasi commented on the issue.
The IMF’s latest staff report emphasizes the alignment of federal and provincial governments on fiscal strategy, underscoring the need for increased provincial responsibility in managing expenditure and revenue collection to maintain budgetary balance.
