The International Monetary Fund (IMF) will dispatch a mission to Islamabad from November 11 to 15 to address Pakistan’s fiscal challenges and explore potential corrective measures, including a possible mini-budget.
Led by Nathan Porter, this delegation will assess Pakistan’s progress under the $7 billion Extended Fund Facility (EFF), though it is not an official review mission.
According to sources, this “SOS mission” reflects the IMF’s urgency, as Pakistan’s recent virtual discussions with the IMF failed to convince the Fund of its commitment to economic reforms. Originally scheduled for early 2025, the IMF could not afford to delay corrective measures, prompting this interim visit to engage in direct talks and potentially outline a mini-budget to realign Pakistan’s fiscal and macroeconomic framework.
Pakistan’s fiscal performance in the first quarter of FY2024-25 initially showed unexpected improvement, primarily due to non-tax revenue from the State Bank of Pakistan (SBP), which generated a quarterly surplus unseen in the last two decades. However, internal reviews by the Federal Board of Revenue (FBR) revealed troubling signs: a tax revenue shortfall of Rs321 billion is anticipated for the first half of the fiscal year, with Rs189 billion already missed in the first four months. The macroeconomic framework is further weakened by lagging large-scale manufacturing (LSM) growth at 1.3%, significantly below the 3% target, alongside a drop in imports and a decrease in inflation.
Amid these shortfalls, the economic management team has the option of reallocating funds from the Public Sector Development Program (PSDP) to address fiscal gaps. Despite a Rs1,100 billion revised allocation for FY2024-25, only Rs22 billion has been utilized in the first quarter, highlighting potential areas for financial reallocation.
Former Ministry of Finance advisor Dr. Khaqan Najeeb underscored the importance of this engagement, calling the EFF program “one of the most stringent ever agreed upon by Pakistan” and distinct from prior arrangements by involving provincial commitments. Dr. Najeeb emphasized that this mid-year assessment seeks to evaluate Pakistan’s adherence to specific performance criteria, structural benchmarks, and indicative targets, particularly those set for the July-September quarter and ongoing performance through December 2024.
With several reform measures unfulfilled, the IMF mission will analyze Pakistan’s fiscal and monetary policy implementations, focusing on governance, energy sector restructuring, state-owned enterprises, and investment policies. Dr. Najeeb highlighted that the mission is likely to scrutinize the August agreement to privatize Pakistan International Airlines (PIA), among other commitments.
This visit underscores the IMF’s proactive approach to monitor Pakistan’s economic indicators closely. Dr. Najeeb urged Pakistani officials to prepare thoroughly to ensure a constructive engagement with the IMF, fostering a dialogue essential for the smooth continuation of the bailout program and averting potential fiscal turbulence ahead.
