ISLAMABAD: Negotiations between Pakistan and the International Monetary Fund (IMF) ended without a staff-level agreement on Thursday, as escalating tensions in the Middle East forced a rethink of the country’s macroeconomic projections.
The IMF mission, led by Iva Petrova, concluded its visit after two weeks of intense discussions on the third review of the $7 billion Extended Fund Facility (EFF). While both sides reported “considerable progress,” the global lender refrained from signing off on the next tranche, citing the need to further assess how the regional conflict impacts Pakistan’s external financing needs.
The delay comes at a sensitive time for the government, which is struggling to broaden the tax base. Sources indicate that the Fund remains dissatisfied with the Federal Board of Revenue’s (FBR) performance. The tax authority not only missed its indicative collection targets for December 2025 but also faces a likely shortfall in its revised annual target of Rs13.5 trillion.
“The discussions will continue in the coming days,” the IMF stated in its end-of-mission report. The Fund emphasized that it must fully evaluate the “impact of recent global developments” on Pakistan’s balance of payments. Rising energy prices and volatile financial markets—triggered by the conflict—threaten to inflate Pakistan’s import bill and complicate its efforts to reach the $17.8 billion foreign exchange reserve target by June.
On the domestic front, the government met its primary surplus targets by slashing development spending, yet it failed to make headway in taxing the retail and wholesale sectors. The IMF pointed out that previous initiatives, including the Tajir Dost Scheme, have yielded negligible results.
Finance Minister Muhammad Aurangzeb, however, remains optimistic. Addressing the Senate Standing Committee on Finance, he defended the country’s macroeconomic stability and noted that the IMF appreciated the government’s fiscal consolidation efforts up to February. He warned that Pakistan must strictly follow global financial regulations to avoid returning to the FATF grey list.
If the talks conclude successfully in the next few days, Pakistan will unlock approximately $1.2 billion under the EFF and the Resilience and Sustainability Facility (RSF). For now, the “SLA” remains elusive as Islamabad and Washington wait to see how the geopolitical dust settles.