IMF-Pakistan budget talks inconclusive over power subsidy disagreement

ISLAMABAD: The budget talks between Pakistan and the International Monetary Fund (IMF) for fiscal year 2025–26 remained inconclusive on Saturday, primarily due to disagreements over proposed relief measures by Prime Minister Shehbaz Sharif, ARY News reported, citing sources.

The IMF reportedly raised objections to several government proposals, particularly additional power subsidies for domestic consumers.

It also dismissed the government’s plan to reduce electricity tariffs for industrial users, demanding the timely tariff hikes during the next fiscal year.

IMF emphasized the need to implement a comprehensive plan to eliminate circular debt in FY2026. This includes negotiations with Independent Power Producers (IPPs) to reduce the debt by Rs348 billion.

Additionally, commercial loans of Rs1,252 billion will be secured from the commercial banks to clear outstanding circular debt, with the IMF demanding that net circular debt in the power sector be reduced to zero inflow in FY2026.

During the talks, the Federal Board of Revenue (FBR) requested a revision of its revenue target of Rs14.307 trillion. The IMF reportedly showed some flexibility, considering a revised target in the range of Rs14.05 trillion to Rs14.1 trillion.

However, the Fund raised concerns over Pakistan’s fiscal discipline, noting that while the FBR is reluctant to increase tax targets, government expenditures continue to rise.

The IMF warned that if spending exceeds the fixed limit, Pakistan will miss its primary balance surplus target – an essential condition of the current IMF loan program.