ISLAMABAD: The International Monetary Fund (IMF) has postponed reaching a staff-level agreement (SLA) with Pakistan after identifying significant fiscal discrepancies and unresolved policy issues during the latest review of the country’s bailout programme.
Officials confirmed that negotiations between Islamabad and the IMF mission ended without finalising the agreement for the next $1 billion tranche under the $7 billion Extended Fund Facility (EFF). The two sides agreed to continue discussions in the coming days to resolve outstanding concerns.
The IMF delegation, led by mission chief Iva Petrova, held talks with Pakistani authorities from February 25 to March 11 in Karachi, Islamabad and through virtual meetings. Although progress was made on several policy areas, differences over fiscal data and budget projections prevented the immediate conclusion of the review.
Fiscal gaps raise concerns
The Fund raised questions about large discrepancies in federal and provincial fiscal accounts, which government officials reported at around Rs413 billion during the first half of the current fiscal year. These gaps include roughly Rs71 billion in federal accounts, caused partly by reporting delays, adjustments between financial institutions and variations in bank deposit data.
IMF officials also sought clarification on revenue assumptions linked to dividends from state-owned institutions, tax collection targets and certain development expenditures. Sources involved in the discussions said the IMF may send a technical mission to review the discrepancies and reconcile the figures before moving forward with the agreement.
Tax collection and budget targets under scrutiny
Another major point of contention involved Pakistan’s tax collection outlook. The IMF questioned whether the Federal Board of Revenue (FBR) could meet the revised tax target for the fiscal year, raising doubts about the government’s ability to achieve the projected primary budget surplus.
Officials acknowledged that the revenue authority has already requested adjustments to the annual collection target, reflecting slower-than-expected receipts during the first half of the fiscal year.
External risks also discussed
During the review talks, both sides examined external factors that could influence Pakistan’s economic outlook. The IMF evaluated the potential impact of rising energy prices and instability in the Middle East on Pakistan’s balance of payments and external financing needs.
Despite these risks, government officials maintain that economic indicators remain stable. Inflation has averaged around 5.5% during the first eight months of fiscal year 2026, below the official target, while remittances are expected to exceed $39 billion by the end of the year, helping support the external sector.