IMF Review Kickoff: What the Mission Is Seeking to Achieve
The International Monetary Fund (IMF) has begun formal discussions with Pakistan’s economic authorities to review the implementation of a $7 billion Extended Fund Facility (EFF) and a $1.1 billion Resilience and Sustainability Facility (RSF). The two-week mission, launched as Pakistan’s performance under the program through June 2025 remains uneven, will assess progress, identify corrective measures, and discuss the pace of reforms needed to meet the program’s biannual targets through December 2025. The opening meeting brought together Finance Minister Muhammad Aurangzeb, the State Bank of Pakistan governor, the finance secretary, and the chairman of the Federal Board of Revenue, signaling the seriousness of the review ahead.
The Economic Performance Under Scrutiny
Pakistan’s macroeconomic trajectory under the IMF program has shown mixed results. Notably, the power sector targets for end-June 2025 were achieved, reflecting successful reforms in energy management and tariff reforms. However, revenue collection has lagged significantly — shortfalls of around Rs 1.2 trillion, roughly 1% of GDP, were reported for the last fiscal year, with the first two months of the current year echoing similar shortfalls. These gaps complicate fiscal consolidation efforts and raise questions about tax administration, base broadening, and compliance levels that are central to the IMF’s stability framework.
During the opening round of discussions, the delegation from Pakistan—led by the finance minister and including senior officials from the central bank and revenue authorities—will review progress against the EFF and RSF milestones. The mission’s objective is twofold: to confirm corrective measures that can close revenue gaps and to ensure that policy actions remain aligned with the program’s targets and Pakistan’s broader economic reform agenda.
Fiscal Reforms, Revenue Mobilisation, and Structural Measures
Revenue underperformance highlights the urgent need for deeper fiscal reforms. The IMF mission is likely to explore concrete steps to improve revenue collection, including tax administration improvements, broadened tax bases, and enhanced customs revenue. While energy sector reforms have borne fruit in meeting power targets, sustained fiscal consolidation requires a credible plan to boost non-tax revenue, rationalize subsidies, and strengthen expenditure controls without compromising social protections. The discussions are expected to frame a near-term corrective package and a longer-term reform trajectory that preserves macroeconomic stability while laying the groundwork for sustainable growth.
The RSF Covenant and Climate-Oriented Fiscal Policy
The RSF component of Pakistan’s program is designed to support resilience and sustainability objectives, including climate-friendly policy measures. In parallel with revenue and expenditure reforms, Pakistan has pursued a brownfield refinery upgrade policy intended to attract investment and modernize refining capacity. Authorities are seeking IMF backing to accelerate this policy, with the aim of unlocking around $6 billion in fresh investment. Upgraded refineries would produce petroleum products aligned with European standards, featuring lower carbon and sulphur emissions. The IMF mission will review the pace of policy implementation, eligibility criteria, and safeguards to ensure the refinery upgrade contributes to both emissions reduction and energy security.
What Happens Next: Roadmap for Implementation
Over the ensuing days, the delegation will engage in forward-looking talks to advance faster execution of remaining targets, address shortfalls, and refine corrective steps. While a staff-level agreement depends on the assessment outcomes, the discussions will set the tone for Pakistan’s fiscal discipline and structural reforms for the next six months and beyond. The discussions also carry implications for investor confidence, given that progress toward revenue goals, energy reforms, and climate-aligned investments are central to restoring macro stability and unlocking future financing opportunities.
Bottom Line
The ongoing IMF review underscores a critical juncture for Pakistan’s economy: steadying the revenue trajectory while continuing to push energy and climate-friendly reforms. If the corrective measures and reform agenda meet IMF expectations, Pakistan could reaffirm the credibility of its macroeconomic program, attract additional investment, and advance toward a more resilient, forward-looking growth path. As the mission unfolds, all eyes will be on how swiftly the authorities can translate commitments into concrete actions and improved fiscal outcomes.
