Pakistan will need to raise more than Rs. 700 billion in additional revenue and continue fiscal tightening measures to meet budget targets for FY2026-27, according to the conclusions of the latest discussions between Islamabad and the International Monetary Fund (IMF).
An IMF mission led by Iva Petrova concluded its visit to Islamabad on Tuesday after holding talks on economic developments, budget preparations and reform implementation under the Extended Fund Facility and Resilience and Sustainability Facility programs.
The IMF said Pakistani authorities had reaffirmed their commitment to achieving a primary budget surplus of 2 percent of GDP in FY27, a key target aimed at strengthening fiscal sustainability and improving economic resilience.
To achieve this goal, the Fund called for broader tax reforms, stronger tax administration, improved spending efficiency and better public financial management at both federal and provincial levels.
According to officials familiar with the discussions, Pakistan will require additional revenue measures equivalent to about 0.6 percent of GDP, or more than Rs. 700 billion, to offset weak tax buoyancy and ensure continued growth in the tax to GDP ratio.
The IMF wants a significant portion of this effort to come from expanding the tax base rather than imposing higher rates on existing taxpayers.
The IMF also emphasized expenditure discipline, recommending that primary spending remain broadly unchanged as a share of GDP. However, it supported higher allocations for targeted cash assistance programs as well as health and education spending.
The Fund warned that low-priority development projects should be canceled if revenue targets are not met.
The IMF further stressed the importance of exchange rate flexibility and the development of a deeper foreign exchange market to help absorb external shocks.
The IMF advised Pakistan to maintain adequate fiscal contingency reserves to manage risks arising from higher energy prices and regional uncertainty. It also recommended that any savings from lower interest payments be preserved rather than spent, helping build additional fiscal buffers.
Beyond the budget, both sides reviewed progress on structural reforms, including energy sector restructuring, state owned enterprise reforms, market liberalization measures and financial sector improvements.
The next IMF mission is scheduled for the second half of 2026.
