Pakistan appears well-placed to secure over $1 billion as the third tranche of the Enhanced Fund Facility (EFF), despite some slippages, as authorities enter policy-level talks with a visiting review mission of the International Monetary Fund (IMF) on Monday. Technical-level discussions have concluded, indicating the need to agree on a couple of waivers and additional measures before wrapping up the review by the weekend (Oct 9-10). The global political environment remains favourable for Pakistan, supporting the disbursement of the next tranche by early next month.
The authorities’ programme performance as of end-June 2025 has been mixed. A positive highlight is the power sector, which has shown improved recovery and a reduction in circular debt. However, federal revenues and provincial performance have emerged as weak areas. The Federal Board of Revenue (FBR) missed the end-June 2025 revenue target by a wide margin and recorded a similar shortfall in the first quarter.
Furthermore, the Punjab and Sindh governments failed to meet their cash surplus commitments and have, along with the federal government, struggled to establish a comprehensive mechanism for agricultural tax collection. Given flood-related challenges and demands, provinces are now more inclined to seek relaxations and waivers.
The dialogue is also covering the rising circular debt in the gas sector and compliance issues regarding state-owned enterprises (SOE) laws. Overall, a combination of corrective measures and relaxations in view of flood-related challenges is expected to pave the way for the conclusion of the second review.
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