The International Monetary Fund’s (IMF) Pakistan mission chief, Nathan Porter, met with Finance Minister Mohammad Aurangzeb in Islamabad on Tuesday to discuss the progress of Pakistan’s $7 billion loan agreement, according to a statement from the Finance Ministry.
This meeting follows an unscheduled visit by Porter to Pakistan, which began on Monday. The timing of the visit is notable as it comes four months before the scheduled first review under the new $7 billion Extended Fund Facility (EFF) that the IMF granted Pakistan in September. The early visit is considered unusual, as the first formal review is not expected until the first quarter of 2025. On Monday, Pakistani officials reiterated their commitment to meeting budgeted revenue targets, while also promising to address any first-quarter revenue shortfalls through improved enforcement and administrative measures.
According to sources familiar with the discussions, the IMF mission raised concerns about the country’s revenue situation, which has fallen short of expectations. The mission will remain in Pakistan until November 15 to discuss recent developments and the performance of the loan program thus far. However, the visit is not part of the first formal review under the EFF, which is scheduled for the first quarter of 2025.
Under the terms of the EFF, Pakistan and the IMF are required to hold biannual review meetings. The first formal review will assess Pakistan’s performance against targets set for the end of December 2024, which will determine whether Pakistan qualifies for a second disbursement of over $1 billion by March 2025. The $7 billion program is divided into six biannual reviews, each releasing $1 billion.
The sources revealed that during the visit, Pakistan informed the IMF mission of a Rs190 billion revenue shortfall in the first four months of the fiscal year, with almost half of the deficit occurring in October alone. This raised concerns among the IMF’s representatives about the worsening revenue situation, particularly with the declining inflation rate. In response, the IMF mission focused not only on the revenue shortfall but also on the progress of Pakistan’s privatization efforts, particularly in relation to the troubled sale of Pakistan International Airlines (PIA). The failed attempt to privatize PIA has raised doubts about the credibility of Pakistan’s privatization strategy.
Despite these concerns, the Federal Board of Revenue (FBR) assured the IMF that it was implementing enforcement measures to address the shortfall and that initial positive results would be visible by the end of the current month. The revenue shortfall, according to FBR officials, is still within the 1% target for the quarter, and there are discussions about the possibility of revising the revenue target downward rather than introducing a supplementary budget.
Over the next few days, the two sides will continue discussions on key performance criteria, including federal revenue targets, state-owned enterprises (SOEs), the external financing gap, and provincial fiscal policies. The goal is to ensure that any potential slippages in performance are addressed before the first formal review. This is critical, as the IMF’s credibility, as well as the success of Pakistan’s economic program, depends on meeting these targets.
