ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have made significant progress toward a staff-level agreement (SLA) on the first review of the country’s $7 billion loan program, IMF Mission Chief Nathan Porter stated on Saturday.
The IMF team, led by Porter, held talks in Pakistan from February 24 to March 14 regarding the 37-month Extended Fund Facility (EFF) and a potential new arrangement under the Resilience and Sustainability Facility (RSF). Discussions will continue via video conference over the coming days to finalize the agreement.
If approved, Pakistan is set to receive $1 billion as the second tranche of the bailout package.
Key Areas of Progress
Porter highlighted several critical areas where Pakistan has shown strong progress under the IMF-backed program:
- Fiscal consolidation to reduce public debt sustainably.
- Tight monetary policy to keep inflation in check.
- Reforms in the energy sector to cut costs and improve viability.
- Structural reforms to drive economic growth, enhance social protection, and increase spending on health and education.
- Climate resilience measures aimed at reducing risks from natural disasters and securing financing under the RSF.
Pakistan formally requested $1 billion under the RSF in October 2024, and discussions are ongoing regarding this funding.
Pakistan Eyes $2.2 Billion in IMF Funding
With the completion of the first review, Pakistan anticipates receiving $2.2 billion, comprising:
- $1 billion from the EFF program.
- $1 billion to $1.2 billion under the RSF to support climate resilience initiatives.
The government has agreed to create a dedicated fund to implement climate-related projects, aligning with the IMF’s climate finance goals.
Economic Adjustments & Revised Projections
During discussions, the IMF and Pakistan revised key economic projections:
- GDP size reduced from Rs123 trillion to Rs116.5 trillion.
- GDP growth projection revised downward.
- Inflation (CPI-based) adjusted from 12.5% to 7% for the fiscal year.
Tajir Dost Scheme Scrapped
The IMF has agreed to scrap the Tajir Dost Scheme (TDS) after the Federal Board of Revenue (FBR) reported that tax collections from retailers, wholesalers, and Associations of Persons (AOPs) exceeded expectations.
- Initially, TDS aimed to collect Rs50 billion, but over Rs400 billion was collected instead.
- With further tax potential in the next four months, the IMF agreed to drop the scheme.
- The FBR has introduced Video Analytics Rules for electronic monitoring of production processes to expand the tax net.
The government’s tax-to-GDP ratio target for FY 2024-25 has been set at 10.6%, with the FBR’s revised tax collection target at Rs12,350 billion.
With further negotiations underway, Pakistan remains on track to secure IMF funding, stabilize its economy, and implement long-term structural reforms.
