Pakistan is preparing to seek a more flexible approach from the International Monetary Fund and to renegotiate the remaining period of its Fund-backed programme. This comes as economic challenges intensify, according to a report published on Tuesday.
Prime Minister Shehbaz Sharif has departed for Davos to attend the World Economic Forum. While there, he is scheduled to meet the IMF’s managing director on January 21.
Senior officials said Pakistan plans to seek revisions to the remaining duration of the $7 billion Extended Fund Facility and the $1.4 billion Resilience and Sustainability Facility. Both programmes run through September 2027. Additionally, Islamabad is seeking fiscal breathing room as it prepares the 2026–27 federal budget.
According to officials, the government will urge the IMF to adopt a lenient stance on fiscal and budgetary targets for the next financial year. The aim is to stabilise growth and revive economic activity before the programme concludes.
The government has already formed a high-level committee, led by Deputy Prime Minister Ishaq Dar, to craft a strategy for exiting the IMF programme after its completion in 2027–28. Officials believe sustained growth will be critical to achieving that goal.
Read: Govt Seeks IMF Flexibility to Ease Growth Constraints Ahead of Next Budget
Recent economic indicators have raised concern. Foreign direct investment fell by 43%. Additionally, the current account shifted from surplus to a $1.2 billion deficit during July–December. Analysts warn that the investment-to-GDP ratio may drop to a historic low by the end of the fiscal year.
Finance Ministry officials, however, remain cautiously optimistic. They project GDP growth could approach 4%. This is compared with the IMF’s earlier estimate of 3.25% to 3.5% following the 2025 floods.
The government expects the current account deficit to reach $2.2–$2.3 billion by June 2026, driven by a widening trade gap. Exports may hover near $32 billion, while imports could range between $72 billion and $76 billion. In addition, remittances are projected to reach $42 billion.
On the fiscal side, the Federal Board of Revenue continues to face pressure to meet revised tax targets. Officials see higher petroleum levies as a short-term measure to bridge revenue gaps and meet IMF-agreed primary balance goals.
An IMF review mission is expected to visit Pakistan in late February or early March 2026 to conduct the third review under the EFF and approve the release of the next tranche. That review will also shape the 2026–27 budget framework.
Officials said the government’s priorities include export-led growth, higher investment, lower power tariffs for industry, and selective tax relief. Proposals under discussion include reducing the super tax on manufacturing, raising income thresholds, and easing policy rates to expand private sector credit. This is especially important for small and medium enterprises. Approval of several measures remains subject to IMF consent.
