IMF Ups Pakistan’s Surplus Target, Urges Spending Cuts

The International Monetary Fund has raised Pakistan’s primary budget surplus target to 1.6% of GDP for FY2025–26, up from 1% this year, signaling a strategic pivot toward strict expenditure control rather than new tax hikes. As per the IMF’s fiscal framework, revenue is projected to grow to 15.2% of GDP (Rs. 19.6 trillion), while total spending is expected to decline to 20.3% of GDP (Rs. 26.3 trillion), reducing the overall budget deficit to 5.1% of GDP.

Defense spending will remain at 2% of GDP, with an 18% year-on-year increase. Development outlays are set at Rs. 921 billion (0.7% of GDP), while subsidies—including Rs. 1.04 trillion for the power sector—will exceed 1% of GDP. The IMF emphasizes improved revenue through enforcement of agricultural income tax and compliance in under-taxed sectors.

This announcement follows the IMF’s approval of a $2.4 billion package for Pakistan, including $1 billion in immediate support and $1.4 billion in climate financing.