IMF, Pakistan agreement may face delays due to new budget measures

ISLAMABAD: The Staff-Level Agreement (SLA) between Pakistan and the International Monetary Fund (IMF) could take a few more weeks to finalise, according to Topline Securities.

The delay may occur as the Pakistani government is expected to present new budgetary measures for the fiscal year 2026 (FY26) or might introduce the budget earlier in order to secure IMF board approval by the end of June.

Topline Securities noted in a report that even if the SLA is signed sooner, the IMF board may impose preconditions, such as the passing of the FY26 budget in alignment with the IMF’s guidelines.

An IMF delegation, led by Nathan Porter, visited Islamabad and Karachi between February 24 and March 14, 2025, to review Pakistan’s economic progress under the Extended Fund Facility (EFF) and discuss a potential new arrangement through the Resilience and Sustainability Facility (RSF).

In a statement following the visit, Porter acknowledged that significant progress had been made toward securing the SLA.

He highlighted that programme implementation had been strong, with discussions advancing in key areas, including fiscal consolidation to reduce public debt, maintaining tight monetary policy to curb inflation, accelerating energy sector reforms, and furthering Pakistan’s structural reform agenda to promote growth while enhancing social protection and increasing spending on health and education.

The IMF also mentioned that policy discussions between the two sides would continue virtually in the coming days to finalise the agreement.

Topline Securities added that these virtual discussions are likely to focus on new tax measures in the FY26 budget, energy sector reforms, and progress on the privatisation programme.

The brokerage firm also warned that delays in the IMF review could impact Pakistan’s external accounts, forcing the government to rely on expensive commercial borrowing to meet its reserve targets.

Once these talks conclude, the IMF staff will present their recommendations to the Executive Board, which must approve the release of the $1 billion tranche.

Read next: PSX rallies on hopes of IMF deal, circular debt resolution