IMF disburses USD 1.023 bn tranche to Pakistan; to hold virtual discussions about budget.

The International Monetary Fund has disbursed a second tranche of USD 1.023 billion under the Extended Fund Facility programme for Pakistan, the central bank said on Wednesday. The disbursement of the second tranche comes on a day when the International Monetary Fund (IMF) is holding virtual discussions on Pakistan’s upcoming budget as the visit of its mission to Islamabad was delayed due to security concerns in the region.

The US federal government is planning to unveil the budget for fiscal 2025-26 on June 2. The IMF talks will continue until May 16. The Central bank said the second tranche amount would be reflected in its foreign exchange reserves for the week ending May 16.

The amount was approved last week by the IMF board under the ongoing Extended Fund Facility (EFF) and allowed an additional arrangement for the USD 1.4 billion Resilience and Sustainability Facility (RSF). The decision to release the funds came after the IMF expressed satisfaction on the first review of Pakistan’s economic reform programme supported by the EFF Arrangement, the bank said.

With due cognizance to Pakistan’s policy efforts under the EFF had already delivered “significant progress” in stabilising the economy and rebuilding confidence, amidst a challenging global environment. “Fiscal performance has been strong, with a primary surplus of 2% of gross domestic product achieved in the first half of FY25, keeping Pakistan on track to meet the financial year end target of 2.1% of GDP. Pakistan’s gross reserves stood at USD 10.3 billion at the end of April, up from USD 9.4 billion in August 2024, and is projected to reach USD 13.9 billion by the end of June 2025 and continue to be rebuilt over the medium term, it was pointed out.

Meanwhile, the IMF talks that started virtually Wednesday will continue until May 16. The global lender has appointed a new mission chief Iva Petrova, a Bulgarian origin staff member to Pakistan and the mission is now expected to travel to Islamabad over the weekend, subject to the security situation. The IMF mission delayed its scheduled arrival here on Tuesday due to uncertainty caused by the India-Pakistan conflict that had affected air travel across the region. “Virtual discussions are expected to be held from today. For the second and final leg of the talks, the IMF team is expected to arrive in Islamabad on Saturday and stay until May 23”, an official release reiterates.

The present IMF’s Resident Representative to Pakistan Mahir Binici did not respond to a request for comment on the change in the travel plan.

Iva Petrova, who holds a PhD degree in economics from the Michigan State University, has been serving as the IMF Mission Chief to Armenia. Previously, she had served with the missions to Israel, Iceland and Latvia.

In Pakistan, the fiscal policy is expected to remain tight in the next fiscal year too. The IMF has asked Pakistan to make a budget on the assumption of having 1.6% of the GDP primary budget surplus, which will require generating about Rs 2 trillion over and above the non-interest expenses. The tax target for the Federal Board of Revenue (FBR) is proposed to be 11% of the GDP. The IMF would ascertain whether the government plans to take credibly realistic measures to back the new tax target.

The IMF has set multiple fiscal conditions, whose successful completion has so far helped smooth continuation of the programme despite initial setbacks. Pakistan has met the IMF targets for a primary budget surplus by the federal government, as well as net revenue collection and cash surplus targets by the four provinces. Against a primary surplus target of Rs 2.7 trillion, the federal government reported a surplus of Rs 3.5 trillion, or 2.8 per cent of GDP.

While the size of the federal budget still remains tentative due to redoing of defence needs and the government plans to announce less than Rs 18 trillion budget. The overall budget deficit target after incorporating large provincial cash surpluses is projected at 5.1% of the GDP or Rs 6.7 trillion.

Team Maverick