IMF expresses satisfaction with Pakistan’s progress

• IMF-Pakistan further talks to proceed online from Turkey.
• Structural reforms crucial for Pakistan’s growth trajectory. 
• Sources say IMF concerned over delays in several targets.

ISLAMABAD: As uncertainty regarding peace and security unfolds in the region, the International Monetary Find (IMF) review team returned from the federal capital after expressing satisfaction with Pakistan’s progress so far, The News reported on Tuesday.

However, they also highlighted the downside risks that Pakistan faces on a medium-term basis. 

The review mission convened a plenary session with Finance Minister Muhammad Aurangzeb and his economic team on Monday morning. It was decided that further negotiations would proceed online from Turkey.

In a meeting with the Pakistani delegation on Friday, it was emphasised that without the continuation of structural reforms, Pakistan’s growth trajectory cannot be sustained. 

This was the essence of the discussions between the two sides before the IMF review team departed from Islamabad for Turkey, where they will continue holding virtual talks.

This reporter had contacted the IMF last Saturday to inquire whether the review mission would complete its ongoing discussions in Islamabad on Monday. The IMF officials had responded that, at that stage, the mission would continue as planned. 

However, on Monday, the IMF issued a brief statement stating: “An IMF mission led by Ms Iva Petrova has started discussions with the authorities in Karachi and Islamabad on the third review of Pakistan’s Extended Fund Facility (EFF) arrangement and the second review of the Resilience and Sustainability Facility (RSF). Discussions will continue to be held virtually.”

Sources revealed that the IMF expressed satisfaction with Pakistan’s macroeconomic performance but voiced concern over delays in several agreed targets. These included the Federal Board of Revenue’s (FBR) revenue shortfall, external financing plans and legislative amendments related to state-owned enterprises and sovereign wealth funds.

Among the key areas flagged by the IMF were the FBR’s revenue shortfall, the implementation of the external financing plan, amendments to statutory bodies under the State-Owned Enterprises Act, and changes to sovereign wealth fund legislation.

The Pakistani delegation informed the IMF that the country’s macroeconomic and fiscal stability is gradually strengthening. The fiscal discipline has produced the desired results, while the rebuilding of foreign exchange reserves has enabled Pakistan to achieve the required buffers.

The IMF review meetings will also cover discussions on FBR performance, the country’s fiscal outlook for the current financial year, and progress in maintaining fiscal discipline by the end of the year.

Virtual discussions will also examine decisions made under the government’s rightsizing committee, which aims to reduce the size of the federal government and cut expenditures. Officials revealed that data prepared for the meeting shows that the federal government currently has 441 departments under 39 ministries, with rightsizing reforms underway in 20 ministries.

According to the report, approximately 54,000 positions will be abolished by the end of 2025, resulting in estimated annual savings of around Rs56 billion, which will be reflected in upcoming budgets.

At the meeting with the IMF review mission to kick off third review of Pakistan’s Extended Fund Facility (EFF) arrangement and the second review of the Resilience and Sustainability Facility (RSF), Finance Minister Aurangzeb underscored that since the successful completion of the previous review, Pakistan has continued to consolidate the hard-earned gains in macroeconomic stability achieved under the EFF and RSF programmes. 

He emphasised the government’s firm resolve to maintain fiscal discipline and safeguard macroeconomic stability, terming these achievements as the result of sustained and difficult reforms.

He highlighted that structural reforms, particularly in taxation and the energy sector, remain central to the government’s reform agenda. He noted that comprehensive transformation efforts in tax administration, encompassing improvements in people, processes and technology, are underway with strong leadership at the highest level. 

He further shared that steps have been taken to fully operationalise the Tax Policy Office to ensure that future taxation policy is guided by economic principles aimed at supporting sustainable growth.

On the privatisation and state-owned enterprise reform agenda, the minister reaffirmed the government’s commitment to advancing key transactions and restructuring initiatives during the year. 

He observed that recent developments have demonstrated growing investor confidence and a renewed appetite among domestic investors, reflecting trust in the economy’s direction and reform trajectory. He added that the privatisation and restructuring process would continue in a transparent and orderly manner.

He also outlined progress on right-sizing the federal government, including the merger of ministries and closure of certain entities, as part of broader public sector reforms aimed at improving efficiency and governance. 

He reiterated the government’s commitment to an export-led growth strategy, supported by trade facilitation measures and tariff rationalisation to enhance competitiveness and reduce import dependency over time.

Aurangzeb further apprised the mission of the government’s response to flood-related challenges during the fiscal year, noting that the availability of fiscal buffers enabled timely rescue and relief efforts. He observed that maintaining macroeconomic stability has strengthened the country’s resilience to external and climate-related shocks.

On economic performance, he shared that recent indicators point toward a gradual recovery, with positive trends in growth and key sectors. However, he acknowledged emerging global headwinds, including evolving geopolitical developments and volatility in international energy markets, which pose potential risks. 

He informed the IMF mission that a high-level committee has been constituted to closely monitor the evolving situation and ensure coordinated policy responses.

The minister also emphasised that while stabilisation efforts were necessary to restore macroeconomic balance, the government remains mindful of the social impact and would continue to pursue policies aimed at enhancing social spending to protect the vulnerable population.

Iva Petrova thanked the minister for the comprehensive briefing and shared insights, including from the mission’s discussions with authorities in Karachi on the ongoing reviews under the EFF and RSF. Both sides agreed to continue further discussions virtually in the coming days. The meeting was attended by State Bank of Pakistan Governor Jameel Ahmad, the finance secretary, Federal Board of Revenue chairman and senior officials of the Finance Division.