Pakistan, IMF to hold virtual talks on FY 2025–26 budget today

ISLAMABAD: Virtual talks are expected today (Monday) between Pakistan and the International Monetary Fund (IMF) for fiscal year 2025–26 budget.

The officials likely to discuss circular debt of the gas sector in the talks, sources said. “Pakistan’s officials will present the plan for ending the gas sector’s circular debt in virtual talks,” sources shared.

Gas sector circular debt has been around Rs 2800 billion. A suggestion to reduce the gas circular debt with dividend expected to be presented, sources said.

The IMF has demanded the data of the gas sector companies. The officials will produce the five years’ performance of the gas companies to the lender.

The monetary fund will be informed about the gas companies gas companies’ profit, loss data as well as the cash flow and balance sheet, according to sources.

The government is expected to submit a plan to the IMF about phasing out the circular debt within five years’ span, sources added.

The budget talks between Pakistan and the IMF remained inconclusive last week, primarily due to disagreements over the relief measures proposed by Prime Minister Shehbaz Sharif’s government, sources said.

The IMF raised objections to government proposals, particularly on additional power subsidies to domestic consumers.

It also dismissed the government’s plan to reduce electricity tariffs for industrial users, and demanded 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.

During the talks, the Federal Board of Revenue (FBR) requested 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.