Pakistan and the International Monetary Fund (IMF) began technical-level talks on Thursday, with discussions focused on fiscal performance, revenue collection, expenditure trends, and external financing, The News reported.
According to officials, the IMF raised concerns over a revenue shortfall of Rs1.2 trillion faced by the Federal Board of Revenue (FBR) in FY2024-25 against its original Rs12.97 trillion target.
Despite Rs1.3 trillion in additional taxes, the FBR collected Rs11.74 trillion after two downward revisions. Officials attributed part of the gap to Rs250 billion in pending recoveries from court cases.
Simultaneously, Pakistan secured $1.377 billion in external loans during July and August of the current fiscal year (FY2025-26), against a full-year projection of $19.9 billion.
Bilateral inflows totalled $232 million, including $200 million from Saudi Arabia under an oil facility. Multilateral creditors, including the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, and Islamic Development Bank, disbursed $780 million, with the World Bank as the lead contributor.
Discussions also covered National Finance Commission (NFC) distribution, fiscal developments, revenue performance, pending litigation, foreign exchange reserves, and the policy rate.
The government shared plans to revise the NFC Award formula, potentially reducing the population-based share for provinces, currently 82%, and introducing weightage for tax performance and low population density.
The Benazir Income Support Programme (BISP) is also proposed for devolution to provinces to enhance their own revenue mobilisation. President Asif Ali Zardari has appointed Finance Minister Muhammad Aurangzeb as chairman of the 11th NFC.
The Finance Ministry has notified a nine-member commission, including provincial finance ministers and technocrats.
On fiscal developments, the IMF was informed that total government expenditure rose to 21.4% of GDP in FY2024-25, up from 19.5% the previous year. The fiscal deficit exceeded Rs6.1trillion, though provinces met IMF requirements by posting surpluses and achieving the primary balance target.
Federal net revenue stood at Rs9.946 trillion against total expenditure of Rs17.036 trillion. The central bank recorded a profit of Rs2.619 trillion, while petroleum levy collection reached Rs1.220 trillion.
Debt servicing consumed Rs8.9 trillion, with Rs7.997 trillion spent on domestic interest and Rs890 billion on external loans.
Defence spending amounted to Rs2.193 trillion. Provinces received Rs6.854 trillion from the divisible pool, with Punjab posting a surplus of Rs348 billion, Sindh Rs283 billion, Khyber Pakhtunkhwa Rs176 billion, and Balochistan Rs113 billion.