Pakistan and the International Monetary Fund (IMF) have begun their second half-yearly economic review talks, where officials briefed the mission on growth, inflation, remittances, exports, and flood-related losses.
Provincial governments also joined the discussions, with Punjab citing floods as the reason for not identifying its budget surplus.
The ongoing talks between Pakistan and the IMF aim to review the country’s macroeconomic performance. According to officials, the growth rate is likely to remain between 3.7 and 4 percent, slightly below the 4.2 percent target set in the federal budget.
Inflation is projected at 7 percent for the fiscal year, while September’s inflation is expected between 3.5 and 4.5 percent. Finance Ministry officials warned that recent flood losses could cause a gradual rise in prices.
Record remittances expected
Officials told the IMF that remittances may reach a record $43 billion during the current fiscal year, surpassing the budget target of $39.4 billion.
The surge in inflows is expected to come from overseas Pakistanis contributing towards reconstruction and rehabilitation efforts, especially in flood-affected regions of Punjab and Khyber Pakhtunkhwa.
Provincial concerns and flood damages
Representatives from provincial governments also met with the IMF team. Punjab refused to identify its budget surplus, citing heavy damages caused by recent floods, and announced that assistance for victims will come from its own resources.
An estimated damage report for Punjab is being prepared. Early assessments suggest losses of Rs50 billion in Sindh and Rs30 billion in Khyber Pakhtunkhwa, while Balochistan reported negligible damage. The IMF has asked Pakistan to share a final consolidated flood damage report soon.
Fiscal challenges
Under the current fiscal framework, all four provinces are required to contribute a budget surplus of Rs1,464 billion. However, last year’s surplus fell short by Rs280 billion, raising concerns about meeting this year’s target.
On the external side, the current account deficit is likely to remain around $1 billion, much lower than the $2.1 billion target. Meanwhile, exports may reach $34.2 billion against a target of $35.2 billion, and imports are projected at $65 billion.
