PM pledges faster reforms as IMF hails economic turnaround

Prime Minister Shehbaz Sharif on Thursday reaffirmed his government’s resolve to accelerate institutional reforms and consolidate macroeconomic stability, saying Pakistan was now transitioning from recovery to sustained growth.

“With the grace of Allah, Pakistan is now moving from economic stability toward sustainable growth,” Shehbaz Sharif said during a high-level meeting with a delegation from International Monetary Fund (IMF) led by Jihad Azour at the PM’s Office.

He emphasised that the government’s top priority was not only to sustain macroeconomic gains but also to expedite comprehensive institutional reforms, crucial for long-term resilience.

Discussions during the meeting centred on the implementation of Pakistan’s current International Monetary Fund (IMF) programme.

Both sides expressed satisfaction over progress made and the positive impact of ongoing reforms.

The IMF delegation welcomed the reforms undertaken by Islamabad and assured continued support for Pakistan’s economic stabilisation and inclusive growth agenda.

The meeting was also attended by key cabinet members including Federal Ministers Ahsan, Iqbal Cheema and Muhammad Aurangzeb, Secretary Finance Imdadullah Bosal, FBR Chairman Rashid Mehmood Langrial, and senior officials.

IMF's regional director, Jihad Azour, is visiting Pakistan this week in the middle of negotiations for approval of the new budget, as both sides are taking time to converge on key issues of increasing taxes and rationalising expenses.

Government sources told The Express Tribune that Jihad Azour, the IMF's Director for the Middle East and Central Asia, is visiting Pakistan 10 days after the approval of the second loan tranche of the $7 billion programme, despite opposition from India. Azour's visit is a testimony to smooth relations between the lender and the borrower, despite New Delhi's negative campaign.

Both the Ministry of Finance and the IMF resident representative remained tight-lipped about the purpose of the visit at a time when the IMF staff is already in Pakistan to reach an agreement on the new budget for fiscal year 2025-26.

One senior government functionary said the government would take up some outstanding budget-related issues with the IMF director, particularly regarding major spending items. The IMF has imposed a new condition on Pakistan that the government must secure parliamentary approval of the new budget in line with the IMF staff agreement to meet programme targets. This leaves little space for the government to implement its own agenda, although PM Sharif wants to provide relief to the salaried class.

The sources said the tax target, defence spending, and some grant-related issues were being discussed. The federal government has decided to allocate nearly Rs2.504 trillion for defence spending in the next fiscal year, which is 18% higher than this year's allocation. However, the IMF's staff-level report released on Saturday showed defence spending at Rs2.414 trillion, an increase of 12%. Some grants and subsidy allocations have also not yet been finalised.

The Federal Board of Revenue (FBR) on Monday presented the taxation proposals for the next fiscal year to the prime minister. The PM was also briefed that the FBR's tax target may be around Rs14.07 trillion, which is roughly Rs240 billion less than the earlier mutually agreed target between the IMF and the government for fiscal year 2025-26, they added.

However, there is a possibility that the government may substantially increase petroleum levy rates in the Finance Bill 2025. The IMF has projected petroleum levy collection at over Rs1.3 trillion for the next fiscal year, which could become the single largest non-tax revenue source if the government starts charging Rs100 per litre levy on petrol and diesel. The current rate is Rs78 per litre.