IMF, Pakistan discuss FY27 budget strategy

May 21, 2026 (MLN): An International Monetary Fund (IMF) mission headed by Iva Petrova has wrapped up its visit to Islamabad after holding discussions with Pakistani authorities from May 13 to May 20, 2026, focusing on the country’s economic outlook, reform progress, and budget planning for fiscal year 2026-27.

In a statement issued at the conclusion of the visit, the IMF said talks remained constructive and covered recent macroeconomic developments, including the economic implications of ongoing tensions in the Middle East, implementation of reforms under the Extended Fund Facility (EFF), and initiatives linked to the Resilience and Sustainability Facility (RSF).

The Fund noted that Pakistani authorities reaffirmed their commitment to achieving a primary budget surplus of 2% of GDP in FY27 to strengthen fiscal sustainability and enhance economic resilience.

The fiscal consolidation plan is expected to be supported through broader tax collection measures, improvements in tax administration, more efficient public spending, and stronger public financial management at both federal and provincial levels.

According to the IMF, discussions regarding the FY27 federal budget will continue over the coming days as authorities finalize revenue and expenditure targets.

The mission also highlighted that the State Bank of Pakistan (SBP) remains committed to maintaining a sufficiently tight monetary policy stance to keep inflation expectations under control.

The central bank also emphasized the need to remain vigilant regarding possible inflationary pressures stemming from higher energy prices.

Furthermore, the IMF stressed the importance of allowing exchange rate flexibility to continue acting as a shock absorber for the economy, while also encouraging further development of the foreign exchange interbank market.

The discussions additionally covered a wide range of structural reforms, including measures related to the energy sector, restructuring of state-owned enterprises, product market liberalization, and reforms aimed at strengthening the financial sector to support sustainable economic growth and attract quality private investment.

Under the RSF framework, progress was reviewed on initiatives such as disaster risk financing, integrating climate-related considerations into budgetary and investment planning, and reforms in power subsidies.

The IMF mission appreciated the cooperation and engagement shown by both federal and provincial authorities during the discussions and acknowledged their continued commitment to maintaining prudent economic policies.

The Fund added that its next mission to Pakistan, expected in the second half of 2026, is likely to include the Article IV consultation alongside reviews under the EFF and RSF programs.

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