Pakistan-IMF Talks Continue Over $7B Loan Program

International Monetary Fund(IMF) has shared a draft of the Memorandum of Economic and Financial Policies (MEFP) with Pakistani authorities. This step is key to finalizing a staff-level agreement under the $7 billion Extended Fund Facility (EFF), which would unlock a $1 billion loan tranche.

The draft MEFP outlines conditions for fiscal consolidation. It includes lowering the annual tax collection target for Federal Board of Revenue (FBR) from Rs. 12.97 trillion to Rs. 12.33 trillion and cutting government spending to maintain a primary surplus. The IMF also questioned the enforcement of the increased Federal Excise Duty (FED) on acetate tow, which has led to under-invoicing and smuggling.

One sticking point is Pakistan’s cross-subsidy plan to use petroleum levy revenue to lower electricity prices. The IMF has raised concerns about its sustainability, warning it could lead to circular debt if global oil prices rise.

The government must now address revenue shortfalls and adjust expenditures to stay on track with the EFF program. The IMF’s final decision will determine Pakistan’s ability to secure the next loan installment and stabilize its economy.