The government of Pakistan has approved Rs. 500 billion in budget adjustments to help manage the massive flood losses sustained across the country. The International Monetary Fund (IMF) has accepted the proposal but urged Pakistan to maintain fiscal discipline and stay within its agreed economic framework.
According to official sources, Pakistan requested the IMF to offset the flood-related expenses against the primary budget surplus target. However, the IMF has resisted any change to the core fiscal goals, suggesting that the government make internal adjustments instead of increasing overall spending.
Punjab, which has suffered the most from the flood losses, has committed to maintaining a Rs. 740 billion cash surplus. However, this depends on the Federal Board of Revenue (FBR) meeting its Rs. 14.1 trillion tax collection goal. The IMF may allow cuts in the Public Sector Development Programme (PSDP) or the use of contingency funds to create room for relief spending.
Discussions are also underway to reduce the FBR’s target to Rs. 13.96 trillion, adjust non-tax revenues, and ease Punjab’s agricultural tax targets. The IMF has warned that provincial spending could exceed limits by around Rs. 150 billion due to ongoing recovery efforts from flood losses.
One proposal being reviewed involves cutting Rs. 300 billion from the PSDP and Rs. 150 billion from contingency reserves, allowing Pakistan to keep its fiscal targets intact. However, senior officials believe the country needs greater flexibility to deal with the financial impact of the floods, which caused extensive infrastructure and agricultural damage.
The IMF’s current conditions require Pakistan to maintain a Rs. 3.1 trillion primary surplus and Rs. 1.464 trillion in provincial cash surpluses. Punjab officials insist they will meet their commitments if the FBR achieves its tax goals.
Key economic indicators such as inflation, GDP growth, and the current account deficit remain under discussion. The government projects growth between 3.5% and 3.9%, while the IMF estimates it may not exceed 3%.
Pakistan continues to seek balance between rebuilding after severe flood losses and maintaining economic stability under the IMF’s fiscal framework.
In other related news also read Pakistan-IMF Talks: Punjab Withholds Surplus Citing Flood Aftermath
