- IMF flags Rs1,675bn power-sector circular debt breach.
- Fund seeks higher current account deficit projection.
- FBR retains Rs15,264bn annual tax collection target.
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) are set to negotiate key economic targets after the visiting mission shared its first draft of the Memorandum of Financial and Economic Policies (MEFP), The News reported on Saturday.
The IMF review mission is expected to stay in Islamabad for the next few days, probably until the middle of next week. If both sides evolve consensus on the MEFP, the staff-level agreement (SLA) will be struck; however, if consensus cannot be reached, the talks will continue virtually.
The IMF has raised concerns over the breach of the Circular Debt (CD) target for the power sector by the end of June 2026. The circular debt stood at Rs1,675bn, which was breached compared to the agreed target for end June 2026. The government has budgeted a power-sector subsidy of Rs830 billion for FY27.
The IMF asked the government to eliminate the cross-subsidy on power usage of up to 200 units and introduce a targeted subsidy through BISP, which will be implemented from January 2027.
The Sovereign Wealth Fund (SWF)-related legislation will be approved by Parliament. The Federal board of Revenue’s (FBR) tax collection target of Rs15,264 billion will remain intact as the tax machinery exceeded its target by a margin of Rs27 billion during the first quarter of the current fiscal year.
The FBR did not make any request for a revision of its annual target at this stage.
During the consultations, the IMF insisted upon projecting the Current Account Deficit (CAD) on the higher side, at up to $4 billion, for the current fiscal year.
The Ministry of Finance had projected, before the visiting review mission of the IMF, that the CAD would remain in the range of $2.7 billion for the current fiscal year.
However, the Annual Plan for 2026-27, approved by the National Economic Council (NEC) under the chairmanship of Prime Minister Shehbaz Sharif, projected the CAD at $3.6 billion for the current fiscal year.
Under the Annual Plan for FY27 the overall current account deficit is likely to remain around $3.599 billion in FY2026-27 if the ceasefire results in a deal among the parties in the Gulf region.
In case the Gulf conflict is prolonged, it will hurt Pakistan’s external sector by disrupting trade with GCC countries, affecting exports of goods and services and likely affecting remittance inflows from more than a million Pakistani workers in the Gulf, which are crucial for Pakistan’s balance of payments. Additionally, global energy supply-chain disruptions due to the war have increased oil import costs, worsening the trade deficit, it further stated.
Pakistan recorded a current account deficit of $543 million during the first two months (July–August) of FY27. According to the State Bank of Pakistan (SBP), this represents a 36% narrowing compared to the $853 million deficit recorded during the same period of the previous fiscal year (FY26).
The IMF also undertook Article IV consultations, a regular process under which the Fund reviews a member country’s economic and financial situation and discusses its economic policies and risks.
Pakistani authorities informed the IMF that the GDP growth rate would hover around 4% for the current fiscal year. But the State Bank of Pakistan (SBP) predicted real growth in the range of 3.5% to 4.5%.
The GDP growth rate is targeted at 4%, with agriculture growth of 3.6%, industrial-sector growth of 4.5% and services growth of 4.2%. However, CPI-based inflation is projected at 8.2%, while the IMF predicted that it might remain elevated in the range of 8.5% to 9.5% on average in the ongoing fiscal year.
