IMF and Pakistan make progress to staff level agreement, says IMF mission chief
ISLAMABAD: The International Monetary Fund (IMF) and Pakistani authorities made significant progress toward reaching a staff level agreement on the first review of an ongoing $7 billion programme, IMF Mission Chief Nathan Porter said in a statement on Saturday.
The mission and Pakistani authorities will continue policy discussions via video conference to finalise these discussions over the coming days, the statement said.
“The IMF and the Pakistani authorities made significant progress toward reaching a Staff Level Agreement (SLA) on the first review under the 37-month Extended Arrangement under the Extended Fund Facility (EFF),” IMF Mission Chief to Pakistan Nathan Porter said in a statement on Friday.
The lender’s team, led by Porter, was in Pakistan from February 24 to March 14 to hold discussions on the first review of Pakistan’s economic programme supported by the EFF and the possibility of a new arrangement under the lender’s Resilience and Sustainability Facility (RSF).
The country’s latest loan programme, secured by the Prime Minister Shehbaz Sharif-led government last year, has played a key role in stabilising Pakistan’s economy and the government has said the country is on course for a long-term recovery.
If the IMF approves the first review of the loan, the country is in line to receive about $1 billion as the second instalment of the loan package.
Highlighting Pakistan’s “strong” implementation of the bailout package, Porter said that the discussions between the two sides “made considerable progress in several areas.
Those areas included the planned fiscal consolidation to durably reduce public debt, maintenance of sufficiently tight monetary policy to maintain low inflation, acceleration of cost-reducing reforms to improve energy sector viability, and implementation of the country’s structural reform agenda to accelerate growth, while strengthening social protection and rebuilding health and education spending.
The IMF official also noted progress in discussions pertaining to Islamabad’s climate reform agenda which aims to reduce vulnerabilities from natural disasters-related risks as well as accompanying reforms which could be supported under a possible arrangement under the RSF.
The mission chief’s statement refers to Pakistan’s formal request, made in October 2024, for around $1 billion under the Resilience and Sustainability Trust (RST).
Furthermore, Porter said that the two sides “will continue policy discussions virtually to finalise these discussions over the coming days”.
Expanding on the IMF review mission in an interview with Geo News , Finance Minister Muhammad Aurangzeb stated that Pakistan had effectively implemented the loan program.
Confirming significant progress in the IMF talks, he added that consultations with the lender would continue next week to achieve fruitful results.
Govt anticipates securing $2.2bn
With the culmination of the first review of the $7bn loan programme, Islamabad is eyeing the anticipated release of $2.2bn under the EFF and the augmentation of Climate Finance.
The government is expecting to receive $1bn under the $7bn EFF, with an additional $1bn to $1.2bn expected to be approved by the IMF’s Executive Board through the augmentation of the RSF — which would bring the total disbursement to approximately $2bn to $2.2bn.
The two-week-long negotiations between Pakistan and the IMF resulted in a broader agreement on a revised framework for macroeconomic and fiscal adjustments for the current fiscal year. Key macroeconomic projections, including GDP growth, CPI-based inflation, and the current account deficit, were revised.
As a result of these adjustments, the size of Pakistan’s economy for the current fiscal year was revised downward from Rs123 trillion to Rs116.5 trillion. The real GDP growth projection was also revised downward, while the average CPI-based inflation was adjusted from 12.5% to 7% for the ongoing fiscal year.
It is to be noted that under the RSF, the Government of Pakistan has agreed to share a number of projects aimed at ensuring climate resilience initiatives. A dedicated fund will be established to finance and execute these projects in the coming years, aligning with the IMF’s climate finance objectives.
Tajir Dost Scheme
Meanwhile, the IMF has agreed to scrap the Tajir Dost Scheme (TDS) after the Federal Board of Revenue (FBR) shared data indicating that tax collections from retailers, wholesalers, and Associations of Persons (AOPs) have far exceeded the Rs50bn target initially envisaged under the scheme.
Following the broader agreement with the IMF to abandon the TDS, the FBR has introduced Video Analytics Rules for the electronic monitoring of production processes.
The move aims to accurately gauge real production levels and bring more goods into the tax net. While the IMF mission has concluded its review talks, no decision has been made yet regarding the FBR’s request to reduce tax rates for the real estate sector.
A top government official has confirmed the publication that the IMF was convinced to drop the TDS after being presented with data showing that the FBR had collected over Rs400bn from the trading activities of retailers, wholesalers, and AOPs.
With the potential for further tax revenue collection in the remaining four months (March to June 2025), the IMF agreed to abandon the TDS, which had proven ineffective from the outset.
“We have agreed with the IMF that a tax-to-GDP ratio of 10.6% will be achieved during the current fiscal year 2024-25, ending on June 30, 2025,” said a top official. He added that the overall nominal growth and size of the economy have shrunk compared to earlier projections, allowing the FBR to meet the desired target of 10.6% of the GDP.
It is estimated that the FBR’s tax collection target has been revised downward from Rs12,970bn to Rs12,350bn for the current fiscal year.
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