ISLAMABAD: The International Monetary Fund (IMF) has assessed an adjustment of over Rs400 billion in the fiscal framework, provided expenditure is also slashed accordingly for the current fiscal year, The News reported on Tuesday.
The policy level parleys kick-started between Pakistan and the visiting IMF review mission; however, the Ministry of Finance informed the Fund mission that the expenditures were quite rigid and would be hard to reduce proportionally to the level of revenue shortfall. The policy-level talks are expected to continue till Wednesday (tomorrow).
At this point, the FBR high-ups informed the IMF that they would strive to fetch the desired tax collection target of Rs14.13 trillion for the current fiscal year despite witnessing a shortfall in achieving the first quarter target.
It was the IMF’s assessment that the FBR might face a revenue shortfall of more than Rs400 billion for the current fiscal year. Pakistani negotiators are confident that both the sides would be able to strike staff-level agreement; however, insiders say that it would be a prerequisite to evolve a consensus on the revised macroeconomic and fiscal framework for striking a staff-level agreement.
In the context of the revised macroeconomic and fiscal framework, the IMF would share the draft Memorandum of Economic and Financial Policies (MEFP), and mutual agreement would pave the way for the staff-level agreement.
In case of lack of consensus on the draft MEFP, it might result in continuation of parleys owing to evolving consensus on the damages and losses caused by the recent flash floods.
Pakistan and the IMF sides dwelt upon changes in the macroeconomic framework. The Pakistani side requested the IMF to revise downward the GDP growth projection from official estimates of 4.2% to hovering around 3.5% for the current fiscal year. The CPI-based inflation is projected to hover around 7% to 8% for the ongoing fiscal year.
The IMF pointed out Pakistan’s continuing external vulnerabilities and warned that any escalation in regional tensions or rise in global commodity prices could further strain macroeconomic stability.
Both sides have begun preparations to finalise the draft of the Memorandum of Economic and Financial Policies (MEFP) and may agree on new structural benchmarks before the next programme review. However, significant differences reportedly remain between the government and the IMF over key assumptions and forecasts for the fiscal year, which will be discussed again in upcoming sessions.
The talks also covered the provincial primary budget surplus targets, which may be adjusted in light of post-flood reconstruction needs.
Pakistan has requested updated damage assessments from international partners, including the World Bank, Asian Development Bank, European Union, and UNDP, to reflect accurate post-disaster estimates. The earlier loss assessment of Rs371 billion has now been revised to over Rs650 billion.
The agenda of the ongoing discussions also includes the Reko Diq mining project, with the IMF team seeking clarity on its investment framework, import requirements, export potential, fiscal implications, and overall macroeconomic impact. The negotiations on the new tariff and auto policies are also scheduled, as Pakistan seeks to secure policy flexibility within the programme framework.