Pakistan may present budget early to secure IMF board approval, says Topline

The signing of a Staff Level Agreement (SLA) between the Pakistani authorities and the International Monetary Fund (IMF) may take a few weeks as the government could share new budgetary measures for FY26 with the global lender or present the budget earlier to secure its board approval before June-end, said Topline Securities.

“Even if SLA is achieved earlier, the board approval may contain some preconditions like passage of Budget FY26 (in line with IMF guidelines etc), in our view,” the brokerage house said in a note on Monday.

An IMF team, led by Nathan Porter, visited Islamabad and Karachi from February 24 to March 14, 2025, to hold discussions on the first review of Pakistan’s economic programme supported by the Extended Fund Facility (EFF) and on a possible new arrangement under the IMF’s Resilience and Sustainability Facility (RSF).

In its post-visit statement, Porter said that “the IMF and the Pakistani authorities made significant progress toward reaching” a SLA.

The IMF mission chief stated: “Programme implementation has been strong, and the discussions have made considerable progress in several areas including the planned fiscal consolidation to durably reduce public debt, maintenance of sufficiently tight monetary policy to maintain low inflation, acceleration of cost-reducing reforms to improve energy sector viability, and implementation of Pakistan’s structural reform agenda to accelerate growth, while strengthening social protection and rebuilding health and education spending.”

“The mission and the authorities will continue policy discussions virtually to finalize these discussions over the coming days,” it added.

Discussing the virtual discussions, Topline believed that the talks “over the next few days will revolve around new tax measures in Budget FY26, energy sector reforms, and progress on privatization plan”.

It added that “the delay in IMF review may have some repercussions on external accounts as well, in our view and the government will have to rely on relatively high-cost commercial borrowings to support/meet reserves targets”.

Following the completion of the ongoing discussions, the IMF staff will finalize its recommendations for the Executive Board’s review, a prerequisite for Board approval for the release of the $1 billion tranche.