Pakistan and the International Monetary Fund (IMF) have made substantial progress toward securing a Staff-Level Agreement (SLA) for the first review of the country’s $7 billion Extended Fund Facility (EFF).
In a statement on Friday, IMF Mission Chief Nathan Porter confirmed that discussions with Pakistani authorities had advanced considerably, bringing the country closer to finalizing the agreement.
The IMF delegation, led by Porter, visited Pakistan from February 24 to March 14 to assess the implementation of the EFF and discuss the possibility of additional funding through the Resilience and Sustainability Facility (RSF). The latest loan program, secured by Pakistan in 2023 under Prime Minister Shehbaz Sharif’s leadership, has played a crucial role in stabilizing the country’s economy, with the government confident in its long-term recovery trajectory.
If the IMF approves the first review, Pakistan is set to receive a $1 billion disbursement as part of the loan package.
Key Areas of Progress
Porter highlighted Pakistan’s strong implementation of the bailout package and noted substantial progress in key economic areas, including:
- Fiscal consolidation to manage public debt.
- Tight monetary policies to control inflation.
- Reforms aimed at reducing energy sector costs.
- Structural reforms to stimulate economic growth while strengthening social protection and increasing spending on health and education.
The discussions also covered Pakistan’s climate reform agenda, designed to mitigate risks associated with natural disasters. The IMF is considering supporting these initiatives under the RSF, following Pakistan’s formal request for $1 billion in climate financing in October 2024.
Porter added that discussions would continue virtually in the coming days to finalize the agreement.
Government Expects $2.2 Billion Disbursement
Pakistan anticipates receiving a total of $2.2 billion under the EFF and RSF following the successful review. This includes:
- $1 billion from the EFF.
- An additional $1 billion to $1.2 billion under the RSF for climate-related projects.
As part of the negotiations, Pakistan’s key economic indicators have been revised:
- The GDP growth forecast has been lowered.
- The total economy size for the fiscal year has been adjusted from Rs123 trillion to Rs116.5 trillion.
- Inflation expectations have been revised down from 12.5% to 7%.
Pakistan has also committed to launching new climate resilience projects, funded through a dedicated initiative aligned with the IMF’s environmental objectives.
IMF Agrees to Scrap Tajir Dost Scheme
The IMF has agreed to discontinue the Tajir Dost Scheme (TDS) after the Federal Board of Revenue (FBR) presented data showing tax collections from retailers, wholesalers, and Associations of Persons (AOPs) had already exceeded Rs400 billion—far surpassing the initial Rs50 billion target.
Instead, the FBR has introduced Video Analytics Rules to enhance electronic monitoring of production processes, ensuring better tax compliance.
Revised Tax Collection Target
Pakistan has agreed with the IMF to achieve a tax-to-GDP ratio of 10.6% by the end of the fiscal year on June 30, 2025. Consequently, the FBR’s tax collection target has been revised downward from Rs12,970 billion to Rs12,350 billion.
With negotiations nearing completion, the government remains optimistic about securing additional IMF funding and advancing key economic reforms.
