Pakistan-IMF talks: Punjab retains excess due to flood impact

IMP – (Special Correspondent / Web Desk) – Pakistan and the International Monetary Fund (IMF) have commenced their second half-yearly economic review meetings, during which officials updated the mission on growth, inflation, remittances, exports, and flood-related losses.

Provincial governments also participated in the meetings, with Punjab claiming floods as the reason for not recognizing their budget surplus.

The current discussions between Pakistan and the IMF attempt to assess the country’s macroeconomic performance. According to officials, the growth rate is expected to continue between 3.7 and 4%, somewhat lower than the 4.2 percent target set in the government budget.

Inflation is forecast to be 7 percent for the fiscal year, with September’s inflation falling between 3.5 and 4.5 percent. Finance Ministry officials have cautioned that recent flood damages may result in a steady increase in pricing.

Record remittances expected

Officials told the IMF that remittances may reach a record $43 billion during the current fiscal year, surpassing the budget target of $39.4 billion.

The surge in inflows is expected to come from overseas Pakistanis contributing towards reconstruction and rehabilitation efforts, especially in flood-affected regions of Punjab and Khyber Pakhtunkhwa.

Provincial concerns and flood damages

Representatives from provincial governments also met with the IMF team. Punjab refused to identify its budget surplus, citing heavy damages caused by recent floods, and announced that assistance for victims will come from its own resources.

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An estimated damage report for Punjab is being prepared. Early assessments suggest losses of Rs50 billion in Sindh and Rs30 billion in Khyber Pakhtunkhwa, while Balochistan reported negligible damage. The IMF has asked Pakistan to share a final consolidated flood damage report soon.

Fiscal challenges

Under the current fiscal framework, all four provinces are required to contribute a budget surplus of Rs1,464 billion. However, last year’s surplus fell short by Rs280 billion, raising concerns about meeting this year’s target.

On the external side, the current account deficit is likely to remain around $1 billion, much lower than the $2.1 billion target. Meanwhile, exports may reach $34.2 billion against a target of $35.2 billion, and imports are projected at $65 billion.