Pakistan Averts Mini-Budget as IMF Talks Conclude on Positive Note

Pakistan has successfully negotiated with the International Monetary Fund to avert a mini-budget before the fiscal year ends in June. According to Finance Ministry officials, as the final round of talks wraps up today, the government has received positive signals from the global lender regarding the country’s economic performance, clearing the path for the release of a $1 billion tranche under the ongoing $7 billion loan program. Sources close to the negotiations revealed that the IMF mission, headed by Nathan Porter, engaged in comprehensive discussions with Finance Minister Muhammad Aurangzeb, examining both the economic achievements of the first half of the fiscal year and forward-looking policy objectives. “The Fund has expressed satisfaction with our fiscal management, though they continue to emphasize the need for expanding the tax base,” a senior ministry official told this ProPakistani on condition of anonymity. The IMF has particularly stressed bringing more businesses from the retail, wholesale, real estate, and dealership sectors into the tax net to ensure sustainable revenue generation over the long term. In what officials describe as a significant breakthrough, the Federal Board of Revenue convinced the IMF to lower the annual tax revenue target from Rs. 12,970 billion to Rs. 12,370 billion after demonstrating improvements in the tax-to-GDP ratio. Nevertheless, the Fund remains firm on eliminating tax exemptions enjoyed by wealthy elites. Large agricultural landowners will likely face agricultural income tax, while major industrialists must pay super tax on high earnings. While acknowledging recent legislative efforts by the government, the IMF delegation has pushed for faster implementation of these taxation measures. Government negotiators proposed reducing tax rates on real estate and property transactions to prevent capital flight and maintain domestic investment. The authorities have also committed in writing to continue efforts to register traders and expand taxation within the services sector, including professionals. The privatization agenda featured prominently in 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 slated 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, with government officials assuring enhanced compliance measures. 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. Throughout the talks, the IMF consistently demanded abolishing tax exemptions for high-income groups, expanding the tax net, privatizing major state enterprises, and reducing tax concessions on solar panels and electric vehicles that primarily benefit wealthier segments of society. 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. The IMF’s official statement will establish the definitive roadmap for Pakistan’s economic policy in the months ahead.