The International Monetary Fund (IMF) has shared the draft of its Memorandum of Economic and Financial Policies with Pakistan (MEFP), laying out key parameters for the country’s 2026–27 budget, while also pushing for more frequent adjustments in fuel prices as part of ongoing negotiations.
The exchange of drafts between the two sides is geared towards reaching a staff-level agreement for the third review and release of the fourth tranche of its loan under the $7bn Extended Fund Facility (EFF), alongside access to $1.4bn through the Resilience and Sustainability Facility (RSF), reports Dawn.
Under the proposed framework, the Pakistan Federal Board of Revenue is expected to target tax collection of PKR15.08tn ($54bn) in the next fiscal year. The current year’s target has already been revised down to PKR13.4tn ($48bn) from earlier projections of PKR14.13tn ($51bn).
Additionally, the IMF has also urged Islamabad to move towards more frequent revisions of petroleum, oil, and lubricant prices to reflect global market movements.
Pakistan recently shifted from fortnightly to weekly adjustments, though this has not proven enough for the Fund, with Pakistani officials saying that the global money lender is seeking even faster revisions, with discussions ongoing over whether changes should occur more frequently.
Analysts at the Pakistan Institute of Development Economics (PIDE), have warned that the recent war in West Asia could have significant spillover effects on Pakistan’s economy, greatly increasing the ongoing economic uncertainty, and downgrading fiscal security and growth.
The PIDE report further suggested that prolonged transit disruptions in the Strait of Hormuz could reduce Pakistan’s exports to Gulf Cooperation Council (GCC) countries by $1.5bn–$2bn, while rising oil prices could add around $4.5bn to the import bill.
The study noted that 81.6% of Pakistan’s energy imports pass through Hormuz, leaving the country highly exposed to supply shocks, and warned that if oil prices rise from $80 to $160 per barrel, the trade deficit could widen from $24bn to $41.8bn, with inflation increasing from 7.1% to 11.1%.
Beyond trade flows, the report laid down risks emanating from rising freight costs, war risk premiums, and disrupted shipping routes, which could serve to further weaken Pakistan’s already very poor export competitiveness, particularly in the textile sector that accounts for nearly 60% of Pakistan’s exports.
Moreover, it further cautioned that any slowdown in remittances from Gulf economies could further strain Pakistan’s balance of payments, given the country’s reliance on external inflows.
