ISLAMABAD: An International Monetary Fund (IMF) mission has arrived in Pakistan for the second review of the country’s economy under the $7 billion loan program.
Initial technical talks are set to begin today, while formal discussions will start on September 29 (Monday) due to Finance Minister Muhammad Aurangzeb’s visit to the United States.
Technical and formal talks schedule
According to the Ministry of Finance, the State Bank, Finance Ministry, and Federal Board of Revenue (FBR) officials will hold an initial meeting today ahead of the IMF delegation’s formal engagement.
The IMF team will remain in Pakistan for two weeks, holding both technical and policy-level talks. The next tranche of $1 billion will be released once the second review is successfully completed.
Pakistan seeks relaxation of loan terms
Islamabad has requested that the IMF relax its conditions for the loan in light of the devastating floods, which continue to strain the economy. Officials have assured that relief measures will be funded without a mini-budget to generate additional tax revenue.
Instead, Pakistan has proposed the introduction of a flood levy, the use of funds already allocated under the emergency budget and options. Sources confirmed that only the federal government would be allowed to use the revenue generated from this levy, while provincial governments will be required to raise additional revenue to share the burden of flood-related expenses.
Use of emergency funds
In the current fiscal year, the government has earmarked Rs389 billion for emergency expenditures — an increase of Rs166 billion compared to the previous year’s allocation of Rs223 billion.
The IMF has asked the government for detailed accounts of how these emergency funds have been used so far before considering any relief package. Officials clarified that the government does not plan to introduce a mini-budget and will rely instead on the allocated emergency funds.
Meanwhile, ahead of the arrival of the IMF mission, the federal government fulfilled a major condition by immediately allowing the commercial import of used vehicles. The IMF had set a deadline of September 30 for the removal of all restrictions in this sector.
Officials confirmed that initially, the import of five-year-old vehicles will be permitted until June 30, 2026. Importers will face a 40% additional tax compared to new vehicles, alongside customs duty, additional customs duty, and regulatory duty.
After July 1, 2026, the age limit for imported vehicles will be removed altogether. The duty on old vehicles will then be gradually reduced by 10% each year until FY 2029-30.
According to previous reports, the IMF visit would include first technical talks followed by policy-level negotiations. Data covering January to June 2025 will be presented in technical talks, while first-quarter results of the current fiscal year will also be evaluated.
Beyond fiscal targets, the IMF mission will also review Pakistan’s progress on climate change measures. The Fund has previously approved $1.4 billion under the Resilience and Sustainability Facility (RSF) and provided additional approval for climate financing, contingent upon Pakistan’s performance under the Extended Fund Facility (EFF).
Finance Ministry confident on targets
Officials at the Finance Ministry have indicated that Pakistan has met most of the IMF’s targets, increasing optimism for a successful outcome. If the talks progress smoothly, the IMF Executive Board will formally approve the release of funds.
Last week, the FBR chairman had clarified that the government planned to meet revenue targets through tax enforcement and compliance measures rather than burdening citizens with fresh levies. The IMF would be persuaded that instead of a mini-budget, revenue would be enhanced by strictly implementing tax measures, sources said.
