Successful Negotiations with the IMF
Pakistan has successfully negotiated with the International Monetary Fund (IMF) to avert a mini-budget before the fiscal year ends in June 2025. The government has received positive feedback from the global lender regarding economic performance, paving the way for the release of a $1 billion tranche under the $7 billion loan program.
IMF Talks and Key Policy Discussions
The final round of talks, led by the IMF mission chief Nathan Porter, involved comprehensive discussions with Finance Minister Muhammad Aurangzeb. The IMF expressed satisfaction with Pakistan’s fiscal management but emphasized the need for broadening the tax base, particularly targeting sectors such as retail, wholesale, real estate, and dealerships.
The Federal Board of Revenue (FBR) convinced the IMF to reduce the annual tax revenue target from Rs. 12,970 billion to Rs. 12,370 billion due to improvements in the tax-to-GDP ratio. However, the IMF remains firm on removing tax exemptions for wealthy elites, including super tax on industrialists and agricultural income tax for large landowners.
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Key Economic and Taxation Reforms
- Tax Expansion: The government has committed to expanding the tax net within the services sector, including professionals and traders.
- Real Estate Reforms: Authorities proposed lowering tax rates on property transactions to prevent capital flight and boost domestic investment.
- Strict Tax Enforcement: The IMF urged stricter implementation of the Point of Sale and Track & Trace systems to curb tax evasion, especially in the retail sector.
Privatization and Structural Reforms
The privatization of state-owned enterprises (SOEs) remained a central topic in discussions. The government submitted plans to privatize three power distribution companies—Islamabad, Faisalabad, and Gujranwala—in the first phase, followed by Multan, Lahore, and Hyderabad in the second phase. Pakistan International Airlines (PIA) is also a high-priority privatization target.
Economic Outlook and IMF’s Final Review
As the policy discussions conclude, the IMF team will submit a final review report for approval by the Fund’s Executive Board, which must authorize the next $1 billion installment. Economic projections suggest:
- Growth exceeding 4% in the next fiscal year
- Inflation stabilizing in single digits
- External financial needs surpassing $20 billion
An Iftar dinner between the Finance Minister and IMF officials will mark the culmination of negotiations, after which final recommendations will be formalized. The IMF’s official statement will determine the roadmap for Pakistan’s economic policies in the coming months.
