IMF accelerates review of $7 billion bailout

The International Monetary Fund (IMF) has decided to dispatch a mission to Pakistan next week—four months ahead of its planned schedule—to evaluate Pakistan's performance on its $7 billion bailout package. This early review follows Pakistan's mixed performance in implementing agreed-upon conditions.

The IMF Mission's early arrival underscores the importance of the programme for IMF management and board members, while providing an opportunity to reassess targets that, according to Pakistani authorities, may have already become irrelevant one month after the loan's approval.

Diplomatic and government sources told The Express Tribune that IMF Pakistan Mission Chief Nathan Porter will lead the delegation, tasked with reviewing progress on the implementation of roughly 40 conditions agreed upon in exchange for the bailout.

Finance ministry spokesperson Qumar Abbasi did not respond to requests for comment. Officials clarified that the IMF's visit is just to review Pakistan's performance during the July-September quarter.

While past IMF reviews were conducted quarterly, for the new programme the parties agreed to biannual assessments. The IMF's staff report, released after the $7 billion loan approval, initially set the date for March 15, 2025, for the "first review and end-December 2024 for the performance and continuous criteria."

However, this mission will arrive just a month and a half after the loan approval and four months ahead of the planned review, examining the results of the July-September targets and progress of the second quarter through October-December 2024.

Outgoing IMF Resident Representative Esther Perez also did not respond to a request for comments on the mission's objectives, given the next review was expected in early 2025.

Within the government, views differ on whether to adjust programme targets or continue with the original goals despite some early setbacks. One group favours resetting certain targets, especially on revenue, while others argue that the IMF's stance during loan approval leaves little room for renegotiation.

If Pakistan sticks to the original targets, sources indicate that the government may be compelled to introduce a mini-budget to address first-quarter shortfalls and anticipated second-quarter gaps. Another option could be to offset tax targets using savings from lower debt servicing costs due to recent interest rate cuts.

The IMF Mission typically includes specialists in monetary and exchange rate policy, financial markets, digitalisation, sovereign debt, climate financing, and fiscal affairs.

Pakistan's first-quarter results for the fiscal year were mixed. The State Bank of Pakistan (SBP) met its monetary targets, and the finance ministry exceeded its quarterly budget surplus target. However, the Federal Board of Revenue (FBR) missed its revenue collection target, while provincial governments failed to achieve their collective cash surplus goal due to overspending by Punjab.

The finance ministry's report indicated a shortfall of Rs182 billion, or 53%, in the provincial cash surplus target of Rs342 billion. The government could not support the FBR's efforts to collect Rs10 billion from traders in the first quarter, missing the target by nearly 99.99%.

Official figures show an overall tax collection shortfall of Rs190 billion over four months, with the FBR collecting Rs3.440 trillion against a target of Rs3.632 trillion, despite record-high taxes imposed this year.

Government officials have alerted the media to the anticipated revenue shortfall, attributing it to discrepancies between target assumptions and actual results for the quarter.

In addition, provincial governments missed the end-October deadline to legislate an increase in agriculture tax rates to 45% amid serious challenges from limited cooperation between federal and provincial governments in fully enforcing IMF conditions.

According to a Ministry of Finance report, Pakistan met IMF targets for the primary budget surplus and net revenue collection by the provinces. The federal government achieved a primary surplus of Rs198 billion, with total surpluses reaching Rs3 trillion, or 2.4% of Gross Domestic Product (GDP). This higher surplus was largely due to booking the annual profit of the central bank in the first quarter.