Islamabad:
The International Monetary Fund (IMF) returned to Washington without formally concluding the discussions, saying that the conversations would continue in the next few days in order to “agree on the budget”, in a statement that shows gaps between the two parties.
“We will continue the discussions to accept the budget of fiscal year 2026 of the fiscal year of the authorities in the coming days,” said Nathan Porter, the protruding head of outgoing mission to Pakistan, in a statement issued after the end of 10 -day conversations in the contours of the new budget.
Porter said the discussions focused on actions to improve income, including strengthening compliance and expansion of the tax base, and prioritizing spending. “
The IMF mission was scheduled to get to Pakistan from May 13 to 23, but due to India-Pakistan tensions, he maintained the first round of Turyia conversations. Face to face discussions began on May 19 from Islamabad, but did not conclude within the period prior to the framework.
The IMF said that his visit to the staff focused on recent economic developments, the implementation of the program and the budgetary strategy for fiscal year 2026.
Government sources said there was a broader understanding about the general objective of the next fiscal year of the surplus of the primary budget; However, there were gaps in the understanding of both parties, particularly about the modus operandi to reach the goal.
Porter said that the authorities in question reaffirmed their commitment to fiscal consolidation while safeguarding social and priority expenses, with the aim of a primary surplus of 1.6% of GDP in the 2016 fiscal year.
In the projected size of the next fiscal year of the economy, the surplus will be equal to almost RS2.1 billion, which is slightly lower than the Ministry of Finance declared last week.
Interestingly, the IMF said that, based on the preliminary findings of this mission, the IMF staff will prepare a report that, subject to the approval of the management, will be presented to the IMF Executive Board for its discussion and decision.
The government sources said that a consensus had not yet been reached on the fiscal objective of the next fiscal year, some income and relief measures to certain sectors. They said that the objective would depend on the expenses disbursements for the three main budget chiefs.
There were also gaps at relief points to the wage class, the real estate sector and the serious pensions, the sources said.
Last week, Prime Minister Shehbaz Sharif described the relief proposed for the salaried class by the FBR as insufficient and, on the other hand, asked the tax machinery to ensure more relief. The Senior FBR and the negotiators of the Ministry of Finance said that the amount of relief of the salaried class had not yet been decided.
The sources said the IMF asked Pakistan to propose alternative measures to provide relief to the salaried class. The Fund suggested imposing taxes on high -end pensioners and using money to provide relief to the salaried class.
However, the condition of the IMF to link relief for the wage class with other measures that, in fact, is a reversal of the injustice carried out in the last budget, was not justified.
The salaried class has already paid RS437 billion in income tax compared to less than RS4 million by merchants.
The IMF declaration on the extension of the tax base seems cosmetic, since it did nothing against the government’s inability to raise taxes due to retailers.
The sources said that Government’s opinion about taxing pensioners was that it would be a politically difficult decision to tax high -end pensioners.
The government is again inclined to provide relief to the real estate sector, particularly reducing transaction taxes, which is not in line with the IMF policy for the sector. The IMF had already agreed to abolish the federal special tax service, said FBB President Rashid Langial, last month.
Nathan said that the IMF “conducted constructive discussions with the authorities in its 2026 fiscal year budget proposals and a broader economic policy, and a reform agenda backed by the installation of extended funds (EFF) 2024 and the installation of resilience and sustainability 2025 (RSF)”.
Porter said that discussions also covered current reforms of the energy sector with the aim of improving financial viability and reducing the high cost structure of the Pakistan electricity sector, as well as other structural reforms that will help foster sustainable growth and promote a more leveling field of play for business and investment.
The sources said the IMF did not agree that the energy division to assign almost 1% of the GDP power subsidies and meant giving RS1.04 billion.
The government has already delayed the budget for more than a week to June 10 after it could not solve all problems before approved the summary to announce the budget on June 2.
Porter said that Pakistan also emphasized his commitment to guarantee the formulation of macroeconomic policies and buffer construction. “In this context, maintaining an adequately adjusted and dependent monetary policy remains a priority to ensure that inflation is anchored within the medium-term target range of the central bank of 5-7%,” Porter said.
Porter reiterated his previous statement and emphasized that “the reconstruction of the damps of the foreign exchange reserve, the preservation of an FX market in full functioning and allow greater flexibility of the exchange rate is essential to strengthen resilience to external shocks.”
Despite the IMF program, Pakistan this time cannot obtain main foreign loans due to a bad credit rating.
Porter said that the IMF team will remain compromised and continue its close dialogue with the authorities and that the next mission associated with the upcoming EFF and RSF reviews in the second half of 2025 is expected.
