The International Monetary Fund (IMF) engaged in productive discussions with Pakistani authorities regarding the nation’s economic status, particularly in light of the ongoing Middle East conflict. Led by Iva Petrova, an IMF mission visited Islamabad from May 13 to 20, focusing on economic developments, reform implementation, and the upcoming federal budget for fiscal year 2027. Petrova emphasized the importance of maintaining a 2% GDP primary surplus target in FY2027 to ensure fiscal sustainability and economic resilience.
The IMF highlighted Pakistan’s commitment to fiscal consolidation through measures such as expanding the tax base, enhancing tax administration, and improving spending efficiency at federal and provincial levels. Discussions on Pakistan’s FY2027 budget are set to continue in the following days. Concerns were raised about inflation and energy prices amidst regional instability, with the State Bank of Pakistan pledging to uphold a tight monetary policy stance to manage inflation expectations and monitor potential second-round effects from energy price hikes.
Exchange rate flexibility was underscored as crucial for stabilizing Pakistan’s economy, with efforts ongoing to strengthen the foreign exchange interbank market. Structural reforms in Pakistan’s energy sector, state-owned enterprises, product market liberalization, and financial sector were also on the agenda to stimulate long-term private investment. Progress under the Resilience and Sustainability Facility, including disaster risk financing, climate integration into budget planning, and power subsidy reforms, was reviewed. The IMF announced its next mission to Pakistan, scheduled for the latter half of 2026, would encompass the Article IV consultation and reviews under the EFF and RSF programs.
