IMF releases aid to Pakistan amid budget talks

THE International Monetary Fund (IMF) has transferred the second payment of $1.023 billion (about £804 million) to Pakistan under its Extended Fund Facility programme, Pakistan's central bank announced on Wednesday (14).

This payment coincides with the start of virtual discussions between the IMF and Pakistani officials about the country's upcoming budget on June 2. The IMF delegation postponed their visit to Islamabad due to regional security concerns but is now expected to arrive this weekend if conditions permit.

The talks, which began virtually on Wednesday, will continue until Friday (16). The IMF has appointed Iva Petrova, a Bulgarian economist with a PhD from Michigan State University, as the new Mission Chief to Pakistan. She will work alongside outgoing chief Nathan Porter during this transition period.

The IMF board approved the funds last week after expressing satisfaction with Pakistan's economic reform progress. The package includes an additional arrangement for the $1.4bn (about £1.1bn) Resilience and Sustainability Facility.

"Pakistan's policy efforts under the Extended Fund Facility have already delivered significant progress in stabilising the economy and rebuilding confidence, despite a challenging global environment," the IMF noted in its assessment.

The IMF highlighted Pakistan's strong fiscal performance, with a primary surplus of two per cent of gross domestic product achieved in the first half of the 2025 financial year. This keeps the country on track to meet its target of 2.1 per cent by the end of the financial year.

Pakistan's foreign reserves stood at $10.3bn (£8.1bn) at the end of April, up from $9.4bn (£7.4bn) in August 2024.

These reserves are projected to reach $13.9bn (£10.9bn) by the end of June 2025 and continue growing over the medium term.

For the upcoming budget, the IMF has asked Pakistan to maintain tight fiscal policy, targeting a primary budget surplus of 1.6 per cent of GDP. This will require generating approximately £5.6bn beyond non-interest expenses.

The tax target for Pakistan's Federal Board of Revenue is proposed at 11 per cent of GDP, or £40.5bn. The overall budget deficit target is projected at 5.1 per cent of GDP or £19bn.

(PTI)