As uncertainty regarding peace and security unfolds in the region, the International Monetary Fund (IMF) review team returned from the federal capital after expressing satisfaction with Pakistan’s progress so far, 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 Türkiye.
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 Türkiye, 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.