ISLAMABAD: The International Monetary Fund (IMF) has concluded its in-person review mission in Pakistan, expressing satisfaction with the country’s progress on its economic stabilization program while simultaneously highlighting significant medium-term risks and delays in meeting several critical targets.
Virtual Talks to Continue from Turkey
The review mission, led by Ms. Iva Petrova, held a plenary session with Finance Minister Muhammad Aurangzeb and his economic team on Monday. Following the meetings, it was decided that further negotiations for the third review of Pakistan’s Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF) would proceed virtually from Turkey.
Satisfaction Tempered by Concerns
Sources familiar with the discussions indicate that while the IMF acknowledged Pakistan’s improving macroeconomic and fiscal stability, it raised concerns over shortfalls in key areas. The lender emphasized that without the continuation of deep structural reforms, Pakistan’s growth trajectory remains unsustainable.
Specific areas of concern flagged by the IMF mission include:
- A revenue shortfall at the Federal Board of Revenue (FBR).
- Delays in implementing the external financing plan.
- Pending legislative amendments related to state-owned enterprises (SOEs) and sovereign wealth funds.
Government’s Reform Commitments
In the meetings, Finance Minister Aurangzeb underscored the government’s resolve to maintain fiscal discipline and safeguard macroeconomic stability, which he termed the result of “sustained and difficult reforms.” He outlined progress on several fronts:
- Taxation: Comprehensive transformation efforts in tax administration are underway, and steps have been taken to operationalize a Tax Policy Office to guide future, growth-oriented tax policy.
- Privatization & SOEs: The government reaffirmed its commitment to advancing key privatization transactions and restructuring initiatives transparently.
- Right-Sizing: Aurangzeb outlined progress on merging ministries and closing entities, with a report indicating approximately 54,000 federal positions will be abolished by end-2025, yielding estimated annual savings of Rs56 billion.
- Export-Led Growth: The government reiterated its commitment to an export-led strategy supported by trade facilitation and tariff rationalization.
Navigating Global Headwinds
The Finance Minister also acknowledged emerging global challenges, including geopolitical developments and volatility in international energy markets, which pose potential risks to recovery. He informed the IMF that a high-level committee has been constituted to monitor the situation and ensure coordinated policy responses.
Ms. Iva Petrova thanked the minister for the comprehensive briefing. Both sides agreed to continue virtual discussions in the coming days. The meeting was also attended by State Bank of Pakistan Governor Jameel Ahmad, the finance secretary, the FBR chairman, and other senior officials.
