Pakistan, IMF Begin Talks Amid Revenue Shortfall, Rising Expenses

Pakistan and the International Monetary Fund (IMF) started technical-level talks on Thursday to discuss the country’s financial performance. The discussions focused on tax collection, government spending, and foreign loans, according to a reports.

Officials said the IMF raised concerns over a major revenue shortfall of Rs1.2 trillion for the 2024-25 financial year. The Federal Board of Revenue (FBR) had set a target of Rs12.97 trillion but managed to collect Rs11.74 trillion — even after two downward revisions. The shortfall remains despite Rs1.3 trillion in new taxes. Part of the gap is due to Rs250 billion stuck in court cases.

Pakistan received $1.377 billion in foreign loans during July and August of FY2025-26, against a full-year target of $19.9 billion. Of this, $232 million came from friendly countries, including $200 million from Saudi Arabia through an oil deal. International financial institutions like the World Bank, Asian Development Bank, and Islamic Development Bank gave a total of $780 million, with the World Bank contributing the most.

Talks also included the National Finance Commission (NFC) award, which decides how federal funds are shared with provinces. The government is considering reducing the provinces’ current 82% population-based share and adding new factors like tax performance and low population density.

There’s also a proposal to hand over the Benazir Income Support Programme (BISP) to the provinces to help them raise their own revenues. President Asif Ali Zardari has appointed Finance Minister Muhammad Aurangzeb as chairman of the 11th NFC, and a new nine-member commission has been formed.

Government spending rose to 21.4% of GDP in FY2024-25, up from 19.5% the previous year. The budget deficit reached over Rs6.1 trillion. However, provinces met IMF targets by posting budget surpluses.

Federal revenue was Rs9.946 trillion, while total spending stood at Rs17.036 trillion. The central bank made a profit of Rs2.619 trillion, and petroleum levy collection reached Rs1.220 trillion.

Debt servicing remained the biggest expense, taking up Rs8.9 trillion — with Rs7.997 trillion going to domestic interest and Rs890 billion to foreign loans. Defence spending was Rs2.193 trillion.

Provinces received Rs6.854 trillion from the federal pool. Surpluses were recorded by Punjab (Rs348 billion), Sindh (Rs283 billion), Khyber Pakhtunkhwa (Rs176 billion), and Balochistan (Rs113 billion).