Despite the country's improved economic performance, the latest round of economic review talks between Pakistan and the International Monetary Fund (IMF) concluded without a staff-level agreement. 

However, sources privy to the development said that pending issues could be resolved through virtual discussions in the coming weeks.

According to officials familiar with the negotiations, Pakistan will be required to implement several measures under the Memorandum of Economic and Financial Policies (MEFP) before securing the next tranche of the IMF loan.

Among these conditions is a further increase in the petroleum levy by Rs 10 per litre, raising it from Rs 60 to Rs 70 per litre.

The government has reportedly expressed its willingness to impose a carbon levy, should the IMF demand it.

RELATED: Pakistan secures successful IMF negotiations for $1bn tranche

The Fund has also urged further reforms in the tax and energy sectors, emphasizing the need for broadening the tax base and eliminating subsidies that distort market pricing. It has reiterated its long-standing demand for bringing the retail, real estate, and wholesale sectors into the formal tax net.

IMF board approval expected in May

Sources within the Ministry of Finance indicate that while no immediate agreement was reached, the IMF Executive Board is expected to review Pakistan’s progress in May.

If the agreed-upon conditions are met, the Board will approve the disbursement of the next tranche of $1 billion under tunder the $7 billion loan programme.

Despite Pakistan’s efforts to meet the IMF’s fiscal consolidation targets, concerns remain over the pace of privatization of state-owned enterprises (SOEs), particularly the electricity distribution companies (DISCOs) and Pakistan International Airlines (PIA).

Also Read: IMF wants higher revenue; Pakistan pledges to cut public spending

The IMF has repeatedly pressed Pakistan to accelerate these reforms as part of broader economic stabilization measures.

IMF satisfied with economic progress

On March 14, the government successfully convinced the global lender that no mini-budget will be introduced before the end of June.

Officials from the Ministry of Finance claim the IMF has expressed satisfaction with the country’s economic performance, paving the way for the release of the next tranche of $1 billion under the $7 billion loan programme.

Sources privy to the discussions revealed that IMF officials, led by Nathan Porter, held extensive meetings with Federal Finance Minister Muhammad Aurangzeb, where the economic performance of the first half of the fiscal year and future policy goals were reviewed.

Read also: IMF wants higher revenue; Pakistan pledges to cut public spending

The Fund reiterated its demand for broadening the tax base, particularly in the retail, wholesale, real estate, and dealership sectors, stressing that more businesses should be brought under the tax net to ensure sustainable revenue generation.

Tax reforms and fiscal targets

In earlier meetings, the Federal Board of Revenue (FBR) has provided assurances to the IMF regarding tax collection improvements, including measures to increase the tax-to-GDP ratio and reduce revenue shortfalls. The government has set an ambitious target of Rs 15,000 billion in tax revenue for the next fiscal year and aims to collect Rs 2,745 billion from non-tax sources.

The IMF has also urged the government to eliminate tax exemptions for the wealthy elite, enforce super tax on large industrialists, and implement direct taxation on agricultural income from large landowners.

According to official estimates, Pakistan’s GDP growth is expected to exceed 4% next fiscal year, compared to 3.5% this year. Inflation is projected to remain in single digits, while external financing needs are estimated at over $20 billion. The government expects to roll over deposits from friendly countries as part of its external debt management strategy.