IMF disburses $1.023 bn tranche to Pak; to hold virtual discussions about budget

The International Monetary Fund (IMF) has disbursed a second tranche of USD 1.023 billion under the Extended Fund Facility programme for Pakistan, the central bank said on Wednesday.

The disbursement of the second tranche comes on a day when the IMF is holding virtual discussions on Pakistan's upcoming budget as the visit of its mission to Islamabad was delayed owing to security concerns in the region.

With the transfer, the total disbursements stand at approximately USD 2.1 billion under the IMF's Extended Fund Facility (EFF) of USD 7 billion, which was signed between Pakistan and the global lender last year.

The federal government is planning to unveil the budget for fiscal 2025-26 on 2 June. The IMF talks will continue until 16 May. The central bank said the second tranche amount would be reflected in its foreign exchange reserves for the week ending 16 May.

The last week by the IMF board under the ongoing EFF and allowed an additional arrangement for the USD 1.4 billion Resilience and Sustainability Facility (RSF).

The RSF is intended to support countries facing climate vulnerabilities and natural disasters by strengthening long-term macroeconomic stability and resilience.

Pakistan is on the IMF bailout package which helped shore up its dwindling reserves. The country received the fund's backing at a critical time last year when it was on the verge of bankruptcy and was saved by the lender providing $3 billion on a short-term basis.

According to details on the IMF website, Pakistan has received at least 25 bailout loans since becoming members of the fund. Interestingly, different governments in Pakistan have promised to announce a goodbye to IMF, but so far failed to fulfil the promise.

The decision to release the funds came after the IMF expressed satisfaction on the first review of Pakistan’s economic reform programme supported by the EFF arrangement, the bank said.

The IMF noted that Pakistan’s policy efforts under the EFF had already delivered “significant progress” in stabilising the economy and rebuilding confidence, amidst a challenging global environment.

Fiscal performance has been strong, with a primary surplus of two per cent of gross domestic product achieved in the first half of FY25, keeping Pakistan on track to meet the end-FY25 target of 2.1 per cent of GDP, it said.

Pakistan’s gross reserves stood at USD 10.3 billion at end-April, up from USD 9.4 billion in August 2024, and are projected to reach USD 13.9 billion by end-June 2025 and continue to be rebuilt over the medium term, it was pointed out.

Meanwhile, the IMF talks that started virtually on Wednesday will continue until 16 May. The global lender has appointed a new mission chief to Pakistan and the mission is now expected to travel to Islamabad over the weekend, subject to the security situation, government sources told the Express Tribune on Tuesday.

The IMF mission delayed its scheduled arrival in Islamabad on Tuesday owing to the uncertainty caused by the India-Pakistan conflict that had affected air travel across the region.

“Virtual discussions are expected to be held from today. For the second and final leg of the talks, the IMF team is expected to arrive in Islamabad on Saturday and stay until 23 May,” the sources said.

The IMF's resident representative to Pakistan Mahir Binici did not respond to a request for comments on the change in travel plans. Finance ministry spokesperson Qumar Abbasi also did not respond to questions on the change in travel plans.

Meanwhile, the IMF appointed Iva Petrova, a Bulgarian-origin staff member, as new mission chief to Pakistan. She will join the discussions along with outgoing mission chief Nathan Porter, who served in the position for an extended term.

Binici also did not comment on whether both outgoing and new mission chiefs would join both rounds of talks.

Petrova, who holds a PhD in economics from Michigan State University, has been serving as IMF mission chief to Armenia. Previously, she had served with the missions to Israel, Iceland and Latvia.

In Pakistan, the fiscal policy is expected to remain tight in the next fiscal year too. The IMF has asked Pakistan to make a budget on the assumption of having 1.6 per cent of the GDP primary budget surplus, which will require generating about Rs 2 trillion over and above the non-interest expenses.

The tax target for the Federal Board of Revenue (FBR) is proposed to be 11 per cent of the GDP or Rs 14.3 trillion. The IMF would examine whether the government plans to take credibly realistic measures to back the new tax target, said the sources.

The IMF has set multiple fiscal conditions, whose successful completion has so far helped smooth continuation of the programme despite initial setbacks.

Pakistan has met the IMF targets for a primary budget surplus by the federal government, as well as net revenue collection and cash surplus targets by the four provinces.

Against a primary surplus target of Rs 2.7 trillion, the federal government reported a surplus of Rs 3.5 trillion, or 2.8 per cent of GDP.

The size of the federal budget still remains tentative owing to a redoing of defence needs and the government plans to announce less than a Rs 18 trillion budget. The overall budget deficit target after incorporating large provincial cash surpluses is projected at 5.1 per cent of the GDP or Rs 6.7 trillion, the sources said.