IMF to Conduct Early Review of Pakistan’s $7 Billion Bailout Program

The International Monetary Fund (IMF) announced it will send a team to Pakistan next week, moving up the review of Pakistan’s $7 billion bailout package by four months. This early visit comes amid mixed results in Pakistan’s implementation of the bailout conditions.

The accelerated review underscores the importance of the program to IMF leadership and presents a chance to reevaluate certain targets, which Pakistani officials argue may already be outdated just one month post-approval. Nathan Porter, the IMF’s Mission Chief for Pakistan, will lead the delegation in assessing around 40 program requirements.

Though Finance Ministry spokesperson Qumar Abbasi did not comment, officials clarified that the review will focus on Pakistan’s July-September performance. Typically, IMF reviews are held quarterly, but the new agreement calls for evaluations every six months. Initially, the first review was set for March 15, 2025, assessing targets through December 2024. The mission will now also review progress for the October-December period.

Departing IMF Resident Representative Esther Perez declined to discuss the mission’s agenda. Within the Pakistani government, there are mixed views on whether to revise program targets. Some officials advocate adjusting goals, especially around revenue, while others feel the IMF’s firm stance leaves little room for change.

If Pakistan sticks with the original targets, it may consider a mini-budget to address current and anticipated revenue shortfalls. Another option could involve offsetting tax collection gaps by utilizing savings from reduced debt service costs after recent interest rate cuts.

The IMF team includes experts in several domains: monetary policy, financial markets, digital transformation, debt management, climate finance, and fiscal policy.

In the first quarter, Pakistan showed a mixed fiscal performance. The State Bank of Pakistan met monetary policy targets, and the finance ministry exceeded its budget surplus goal. However, the Federal Board of Revenue (FBR) fell short on revenue targets, and provincial governments, particularly Punjab, overspent, missing collective cash surplus objectives. The finance ministry reported a Rs182 billion shortfall, amounting to 53% of the provincial target. Additionally, efforts to collect Rs10 billion from traders fell short by nearly 100%, with total tax collections coming in Rs190 billion below target over four months. The FBR collected Rs3.44 trillion against a target of Rs3.632 trillion despite historically high taxes.

Officials have indicated to media that revenue shortfalls stemmed from discrepancies between projected and actual results. Provincial governments also missed an end-October deadline to increase agricultural tax rates to 45%, due in part to limited federal-provincial cooperation on IMF conditions.

Despite some setbacks, Pakistan met its primary budget surplus and net provincial revenue targets, achieving a primary surplus of Rs198 billion. Total surpluses reached Rs3 trillion, or 2.4% of GDP, largely due to accounting for central bank profits in the first quarter.

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