KEY POINTS
- IMF mission resumes second review amid Pakistan’s flood recovery efforts
- Finance Minister Muhammad Aurangzeb meets IMF team after initial talks without him
- Discussions focus on revenue shortfalls, fiscal targets, and governance reforms
- Flood-related expenditure may provide cushion for missed performance benchmarks
ISLAMABAD: Pakistan has opened talks with the International Monetary Fund (IMF) to secure the next $1 billion tranche under its $7 billion Extended Fund Facility (EFF), with the devastating floods emerging as a critical factor in negotiations over missed fiscal and structural targets.
The IMF mission arrived in Islamabad on September 25 to initiate the review, but began the talks without Finance Minister Muhammad Aurangzeb, who was abroad at the time.
The rescheduled meeting on September 29 (today) saw the minister leading his economic team, including Finance Secretary Imdadullah Bosal, State Bank Governor Jameel Ahmed, and Federal Board of Revenue Chairman Rashid Mahmood Langrial, in detailed deliberations with IMF officials.
According to sources close to the negotiations, both sides reviewed Pakistan’s revenue shortfalls, spending discipline, and progress on ongoing reforms. The officials, during the meeting, underlined the unprecedented impact of the recent floods on government revenues and program implementation.
The IMF has, reportedly, indicated that these exceptional circumstances could factor into the review of certain quantitative performance criteria and structural benchmarks.
The discussions also revisited the climate-linked Resilience and Sustainability Facility (RSF) that the IMF Board had approved alongside the previous tranche.
That facility, amounting to $1.4 billion, is intended to support Pakistan’s climate resilience projects, including flood mitigation, disaster recovery, and adaptation initiatives — a framework now gaining prominence amid the country’s current flood rehabilitation efforts.
The IMF team requested updates on anti-money laundering measures and the Governance and Corruption Risk Assessment Report, which the Finance Ministry acknowledged has been delayed. Pakistani officials briefed the mission on the steps taken to strengthen oversight, including the establishment of provincial-level anti-money laundering enforcement agencies and the asset declaration requirements for officers in pay grades 17–22.
Technical discussions are expected to be followed by policy-level talks, with Pakistan’s first-quarter fiscal performance also under review.
Sources indicated that the government is emphasising its flood relief and reconstruction spending as justification for missing some targets, including revenue collection benchmarks and provincial cash surpluses.
If negotiations progress positively, the IMF Board is expected to approve the release of the next $1 billion tranche, a crucial inflow as Pakistan navigates the dual challenge of macroeconomic stabilisation and post-flood recovery.
The mission is also reportedly reviewing Pakistan’s National Fiscal Pact, development project transparency, and capital market reforms as part of a broader assessment of structural reforms.
