• The government faces a difficult task as ITSEX flood-related relaxation
•Funds question the use of emergency funds, delays in governance reform
• The $1 billion amount depends on the progress of review negotiations
Islamabad: The International Monetary Fund (IMF) review mission began work in both Karachi and Islamabad on Thursday, holding discussions with authorities on the performance of the mixed program without having to engage with the customary opening ceremony of the Finance and Tax Minister Muhammad Aurangzeb, who is currently visiting the United States.
Sources said Mr. Aurangzeb’s introductory meeting, originally scheduled for September 25, has now been transferred to Monday (September 29), in his absence. Meanwhile, two IMF teams – one involving monetary policy and the other involving fiscal policy – are engaged to the Pakistan Bank and federal government entities.
The mission is expected to stay for about two weeks, with forward-looking discussions and urged authorities to speed up the implementation of the targets at the end of November 2025.
According to sources, the government has used one of the budget allocations of natural disasters and emergency situations of Rs 39,000 crore, with Rs 1,3 billion in past dues in commercial banks to obtain incentives and festivals related to remittances sent through formal channels.
Now the government must make reasonable payments for these in the emergency fund, as the fund is also seeking IMF relaxation Flood loss. Furthermore, although an estimated Rs 10 billion is required, no such incentives have been allocated in the current budget.
The IMF’s mandate also anticipates that the scale of losses caused by floods is also clear, but the government has not yet finalized its estimate. Authorities hope the fund will be able to relax in primary budget surplus and fiscal deficit targets to create flood-related spending space without resorting to new taxes or cutting development spending.
The government missed several key targets ending in June 2025, including FBR revenue revenue, retail tax collection and provincial cash surplus, and may have difficulties in these areas.
Meanwhile, the Governance and Corruption Diagnostic Report – the pending report of the authorities to be reviewed and published – was still released, putting relevant government plans in trouble. Despite the commitments made by the International Monetary Fund (IMF), progress in governance reforms in state-owned enterprises (SINEs) has also stagnated.
Although the provincial legislature successfully enacted the Agricultural Income Tax Act in a timely and successfully manner, their actual implementation and collection from September to October remain uncertain, especially considering the flood situation in Punjab and Sindh. This uncertainty also obscures the government’s ability to assess and provide the required support to people, departments and facilities affected by the flood.
On the positive side, Pakistan has mastered almost all the quantitative performance standards from June to June 2025, but it continues to laugh at indicative goals and structural benchmarks. These gaps may affect the speed of implementation in the coming months.
With the $7 billion expansion fund facility and $1.4 billion climate resilience and sustainability facilities reviewed twice a year, both parties must reach an agreement on past performance and future commitments.
If the review is successfully concluded, Pakistan will receive approximately US$1 billion (equivalent to US$760 million of the IMF’s special painting rights) by the end of next month.
Posted in Dawn on September 26, 2025
