In response to significant deviations from performance targets, the International Monetary Fund (IMF) has scheduled an emergency mission to Islamabad next week to address concerns and press for necessary adjustments, potentially through a mini-budget. This visit, led by Nathan Porter, is set to take place from November 11 to 15.
The IMF staff will focus on the fiscal and macroeconomic framework of Pakistan’s $7 billion Extended Fund Facility (EFF), especially after notable discrepancies in fiscal numbers surfaced. The mission aims to discuss these developments and evaluate the program’s performance to date, though it is not part of the formal first review, which will occur no earlier than the first quarter of 2025.
The decision for an unscheduled visit comes after Pakistani authorities were unable to convince the IMF through virtual meetings that they are prepared to take corrective actions. According to sources, this mission is crucial because the IMF could not wait until the planned February-March review, as it would be too late to address fiscal challenges effectively.
In the first quarter of the fiscal year (July-September), Pakistan’s fiscal performance showed positive results, mainly due to non-tax revenue from the State Bank of Pakistan (SBP), which converted the deficit into a surplus for the first time in two decades. However, the Federal Board of Revenue (FBR) has identified a potential tax shortfall of Rs321 billion for the first half of the year, with a Rs189 billion gap already present.
The IMF mission will assess Pakistan’s adherence to specific targets under the EFF, including structural benchmarks and performance criteria. One area of concern is the country’s economic slowdown, with large-scale manufacturing growth falling short of targets. The IMF’s proactive engagement highlights the need for timely corrective measures to ensure continued progress under the program and to meet fiscal year 2025 targets.
Experts believe that face-to-face discussions will be crucial in addressing the dynamic challenges Pakistan faces and in ensuring the successful implementation of reforms, including the privatization of Pakistan International Airlines (PIA). The outcome of these talks will significantly influence the continuation of Pakistan’s engagement with the IMF and its ability to stabilize the economy.
