Pakistan and the International Monetary Fund are set to continue discussions on the upcoming fiscal year 2027 budget, with the Fund urging steady steps to improve public finances through wider taxation and stricter control over spending.
The talks follow a staff visit by an IMF mission led by Iva Petrova, which took place in Islamabad from May 13 to May 20. The visit reviewed recent economic trends, progress on reforms, and initial plans for the next budget.
Focus on taxes and spending
In a statement issued at the end of the visit, the IMF said discussions covered the country’s economic situation, including the impact of disruptions linked to tensions in the Middle East.
Officials also discussed the government’s budget strategy for FY2027. Pakistan has reaffirmed its plan to achieve a primary surplus of 2 percent of gross domestic product, a move seen as key to keeping public debt under control and improving financial stability.
The IMF highlighted that this goal would require gradual fiscal tightening. This includes expanding the tax net, improving how taxes are collected, and making government spending more efficient at both federal and provincial levels.
Talks on the budget are expected to continue in the coming days as both sides work to finalise key measures.
Inflation, exchange rate and reforms
The IMF noted that the State Bank of Pakistan has committed to maintaining a tight monetary policy to keep inflation in check. The central bank is also monitoring the possible impact of rising energy prices on overall inflation.
On the external side, the Fund stressed the importance of a flexible exchange rate, saying it should continue to help absorb economic shocks. It also encouraged further efforts to deepen the foreign exchange market.
Beyond the budget, discussions also covered wider reforms. These include changes in the energy sector, restructuring of state-owned enterprises, and steps to open up markets to encourage private investment.
Climate-related planning was also part of the talks under the Resilience and Sustainability Facility. This includes building systems to manage disaster risks and bringing climate considerations into budget decisions.
The IMF thanked Pakistani authorities for their cooperation during the visit and said the next round of talks, including a broader economic review, is expected in the second half of 2026.
