An International Monetary Fund (IMF) delegation is currently in Islamabad to assess Pakistan’s progress on the $7 billion funding programme. The outcome of this review is critical, as it will determine whether the next tranche of funding will be disbursed smoothly or if unexpected obstacles will emerge to delay the process. While government officials remain optimistic about meeting the IMF’s requirements, concerns persist over tax shortfalls and technical slippages that could impact the review’s outcome.

The assessment will focus on Pakistan’s compliance with quantitative performance criteria, structural benchmarks, and indicative targets set for the first half of the current fiscal year. Some delays in meeting certain goals, such as the implementation of legislation on agricultural tax, have raised concerns. However, authorities argue that these slippages will be overlooked due to Pakistan’s stronger-than-expected primary budget surplus and a higher revenue-to-GDP ratio.

One of the most pressing concerns is the shortfall in tax revenue, which the Federal Board of Revenue (FBR) attributes to reduced tax collection from imports, sluggish growth in the large-scale manufacturing (LSM) sector, and an unexpected decline in inflation. While the IMF’s response to this shortfall remains uncertain, investor anxiety is evident in the recent decline of the stock market, driven by fears of additional measures being imposed to compensate for the revenue gap.

Despite these concerns, the review is expected to progress smoothly without harsh new conditions for the remainder of the fiscal year. The successful completion of this evaluation is essential for sustaining economic stability, unlocking financial inflows from other multilateral agencies, and securing an improved sovereign credit rating. These factors are crucial to Pakistan’s ambitions of raising funds from international bond markets. Any setbacks in the IMF programme could derail these plans and reignite economic uncertainty.

For now, macroeconomic indicators offer a temporary reprieve. The Pakistani rupee has remained stable, inflation has dropped to an unprecedented 1.4 percent, the current account is running a surplus of over $600 million, remittances have surged past $3 billion per month, and exports are showing resilience. However, these improvements have come at a significant cost: domestic economic growth has slowed dramatically, while unemployment and poverty continue to rise.

With a second Trump presidency poised to reshape global economic and political dynamics, Pakistan must act decisively to free itself from economic stagnation and restructure its financial framework. The current IMF bailout presents a critical opportunity to implement meaningful reforms and break the cycle of repeated economic crises. Policymakers must seize this moment to implement sustainable solutions, ensuring long-term financial stability and reducing reliance on international assistance. If decisive action is not taken now, Pakistan risks falling back into a cycle of financial instability, with dire consequences for its future economic trajectory.