Pakistan Fails to Meet Three Crucial IMF Revenue Goals for the Second Assessment of a $7 Billion Bailout Package
Pakistan Falls Short on IMF Fiscal Conditions, Misses Provincial Cash-Surplus Targets
Pakistan has made mixed progress on the International Monetary Fund's (IMF) fiscal conditions for the USD 7 billion Extended Fund Facility (EFF). The country has completed the first review and achieved some major targets, including a primary budget surplus, but it missed several key fiscal benchmarks ahead of the second review.
The primary budget surplus generated by the collective provinces amounted to PKR 921 billion, falling short of the IMF target by PKR 280 billion. The provinces' cash surpluses were as follows: Punjab recorded PKR 348 billion, Sindh PKR 283 billion, Khyber-Pakhtunkhwa PKR 176 billion, and Balochistan PKR 113 billion. However, each province reported statistical discrepancies due to additional or off-budget expenditures.
One silver lining in this situation is that Pakistan achieved its primary budget surplus target of PKR 2.4 trillion alongside total revenues collected by the four provinces. This marks the second consecutive year of a primary surplus and the highest in 24 years, surpassing the IMF's expectations.
Pakistan missed three of five principal fiscal conditions for the second review. The provinces failed to deliver the targeted PKR 1.2 trillion cash surpluses, and the Federal Board of Revenue (FBR) missed two revenue-related conditions – the overall revenue collection target (PKR 12.3 trillion) and the PKR 50 billion retail tax collection under the Tajir Dost scheme.
The Pakistani government has put the blame for the setbacks on provincial overspending, while stating that it had maintained fiscal discipline. The FBR fell short of its overall revenue target, and the overall fiscal deficit declined to 5.4 per cent of GDP (PKR 6.2 trillion), below the original target of 5.9 per cent.
Despite missing several targets, the Pakistani government expects minimal obstacles during its next month's review talks for the release of the next USD 1 billion tranche. The government attributes the success in maintaining primary current expenditures within limits to lower subsidy releases, which were only 49% of the allocated target.
The shortfall in revenues is attributed to the provinces failing to generate the expected cash surpluses and the federal government falling short of tax collection targets. Interest costs rose to PKR 8.9 trillion, and defence spending reached PKR 2.2 trillion. After distributing PKR 6.9 trillion to provinces, federal net income stood at PKR 9.9 trillion, falling short of covering interest and defence outlays by PKR 1.2 trillion.
The IMF has signalled closer monitoring and added structural benchmarks where compliance has been weak. Continued slippages could prompt further conditionality, delays, or suspension of disbursements. The successful completion of reviews so far has helped rebuild investor confidence and stabilise macro indicators, but renewed program risks and geopolitical tensions could weigh on reserves, borrowing costs, and Pakistan's international standing if slippages persist.
The IMF's public statements describe performance as "strong so far" after the first review, while Pakistani media and business outlets report missed targets ahead of the second review. The picture is therefore mixed and evolving. Watch for IMF Executive Board decisions and IMF staff reports for definitive outcomes and any updated conditionality.
[1] IMF Executive Board Approves Pakistan’s First Review Under the 37-Month, $7 Billion EFF, [Link to source] [2] Pakistan completes first review under IMF’s $7 billion bailout, [Link to source] [3] Pakistan misses key fiscal targets ahead of IMF review, [Link to source] [4] IMF imposes additional structural benchmarks on Pakistan, [Link to source] [5] Pakistan's mixed progress on IMF's fiscal conditions, [Link to source]
News sources report mixed progress by Pakistan on its International Monetary Fund's (IMF) fiscal conditions for the Extended Fund Facility (EFF), with the country achieving its primary budget surplus target but missing key fiscal benchmarks, such as the PKR 1.2 trillion cash surpluses from the provinces and revenue-related conditions.
Analysis and opinions in finance and business sectors question the ability of Pakistan to meet its commitments under the EFF due to ongoing fiscal shortfalls, with the failure to meet several targets raising concerns about the stability of the country's economy and its standing with global financial institutions, such as the IMF.
