The International Monetary Fund (IMF) has disbursed a second tranche of USD 1.023 billion to Pakistan under the Extended Fund Facility (EFF), the State Bank of Pakistan confirmed on Wednesday.The disbursement, approved last week by the IMF’s Executive Board, coincides with virtual discussions between Pakistani officials and the IMF on the country’s upcoming budget for FY26. The talks, originally scheduled to be held in Islamabad, were shifted online due to regional security concerns.
According to the central bank, the tranche will be reflected in the country’s foreign exchange reserves for the week ending May 16. The IMF board also approved Pakistan’s access to an additional USD 1.4 billion under the Resilience and Sustainability Facility (RSF).
Economic progress acknowledged
The IMF stated that Pakistan’s economic reform programme has shown ‘significant progress’ in stabilising the economy. “Fiscal performance has been strong, with a primary surplus of 2% of GDP achieved in the first half of FY25,” the IMF said. Pakistan’s gross reserves stood at USD 10.3 billion at the end of April, up from USD 9.4 billion in August 2024. Reserves are projected to rise to USD 13.9 billion by June 2025.
Virtual discussions on the FY26 budget began on May 8 and are expected to continue until May 16. According to The Express Tribune, the IMF mission delayed its arrival in Islamabad due to travel disruptions caused by tensions in the region. Subject to security conditions, the team may arrive in Pakistan on May 18 and stay until May 23.
Iva Petrova, currently IMF Mission Chief to Armenia, has been appointed as the new Mission Chief to Pakistan, succeeding Nathan Porter. Petrova holds a PhD in economics from Michigan State University and has previously served in IMF missions to Israel, Iceland, and Latvia.
Revenue and surplus targets under review
The IMF has advised Pakistan to maintain tight fiscal discipline in the next fiscal year. The federal budget, to be unveiled on June 2, is expected to target a primary surplus of 1.6% of GDP. This will require mobilising around Rs 2 trillion beyond non-interest expenses.
The proposed tax revenue target for the Federal Board of Revenue (FBR) is Rs 14.3 trillion or 11% of GDP. The IMF is expected to scrutinise the government’s plans to meet this target during the ongoing talks.
Sources said that Pakistan has so far met key IMF benchmarks, including a primary budget surplus and revenue targets set for both the federal and provincial governments. The federal government reported a primary surplus of Rs 3.5 trillion (2.8% of GDP) against the IMF’s target of Rs 2.7 trillion.
The overall budget deficit for FY26 is projected at 5.1% of GDP or Rs 6.7 trillion, with the federal budget size likely to be kept under Rs 18 trillion, pending adjustments to defence allocations.
(With inputs from PTI)