ISLAMABAD: Crucial decisions have emerged from the ongoing economic negotiations between the Government of Pakistan and the International Monetary Fund (IMF).
The IMF has given Pakistan a deadline until 2031 to completely eliminate the circular debt in the power sector. As part of this agreement, Pakistan is required to maintain zero growth in circular debt flow each year moving forward.
According to sources, the government has decided to increase the transition levy on captive power plants. A 10% levy will be imposed on captive power plants in the current fiscal year, which will increase to 15% from January 2026. The government expects to generate PKR 105 billion in revenue during the current fiscal year from off-grid captive power plants alone.
Flood Damage and Its Impact on the Economy
During a briefing to the IMF delegation, the government revealed that the recent floods have caused PKR 370 billion in damages to the national economy. The floods resulted in the deaths of 1,006 people and injured 1,063 across the country. Additionally, 12,569 houses, 2,130 kilometers of roads, and 248 bridges were destroyed.
The briefing further disclosed that 866 water facilities, 1,098 educational institutions, and 128 health centers were affected. The agriculture sector alone suffered a loss of PKR 155 billion, of which PKR 87 billion was due to damage to key crops.
Approximately 3.26 million acres of agricultural land were impacted, and 11,000 livestock animals perished.
Economic Indicators and External Financing Needs
The government informed the IMF that the GDP growth target for the current fiscal year is 3.9%, and Pakistan will require USD 26 billion in external financing during the same period.
It was also shared that Pakistan has already made a USD 500 million payment in September 2025, and a USD 1 billion Eurobond repayment is due in April 2026. The government is also considering issuing new Eurobonds in the last quarter of the 2025–26 fiscal year to help meet financing needs.
According to sources, economic review talks between Pakistan’s economic team and the IMF delegation are ongoing today and are expected to continue, with further policy discussions and commitments on the agenda.
