ISLAMABAD: The International Monetary Fund (IMF) has departed from Pakistan without finalizing the latest round of discussions, indicating that talks on the fiscal year 2026 budget will continue in the coming days. In a statement, IMF Mission Chief Nathan Porter said that the discussions were ongoing to reach an agreement on Pakistan's upcoming federal budget.
The negotiations, initially held virtually due to regional tensions, later resumed in Islamabad but failed to conclude within the pre-agreed timeframe. Talks centered on revenue generation, tax base expansion, and prioritizing government spending. Porter noted that Pakistan’s authorities are committed to fiscal consolidation while maintaining key social and development expenditures, aiming for a primary surplus of 1.6% of GDP—or approximately Rs2.1 trillion.
Despite some consensus on broader fiscal goals, disagreements remain, particularly over tax targets, relief for salaried individuals, and taxation of pensions. Prime Minister Shehbaz Sharif recently deemed the proposed relief for salaried workers insufficient and called for further measures. Meanwhile, the IMF has proposed taxing high-income pensioners to fund relief measures—an idea the government considers politically challenging.
Discussions also covered energy sector reforms and structural changes to boost long-term economic resilience. The IMF rejected the government's request to allocate 1% of GDP to power subsidies, capping the amount at Rs1.04 trillion.
Due to unresolved issues, the budget presentation has been delayed to June 10. The IMF emphasized maintaining tight monetary policy, exchange rate flexibility, and rebuilding foreign reserves. Further talks and the next program review are expected in the second half of 2025.
