Pakistan, IMF to revise FY26 budget targets as flood losses hit Rs650 billion: report

GDP growth expected to slow by 0.6–1%, while non-tax revenue targets and provincial surpluses also adjusted amid rising economic impact

Pakistan and the International Monetary Fund (IMF) are preparing to adjust the fiscal targets for the current financial year following updated assessments of losses from recent flash floods, which have been estimated at Rs650 billion. The revisions are likely to affect the Federal Board of Revenue’s (FBR) tax collection and non-tax revenue targets as well as macroeconomic projections under the $7 billion Extended Fund Facility (EFF) and Resilience Sustainability Facility (RSF), The News reported.

Initial assessments had suggested limited impact from the floods, but the Rapid Need Assessment (RNA) conducted across all four provinces now estimates total losses at around Rs650 billion. Officials warned that the figure could rise further, as international donors, including the World Bank, Asian Development Bank, European Union, and UNDP, have yet to validate provincial damage estimates.

Government sources confirmed that the preliminary GDP growth forecast of 4.2% for FY26 may be revised downward to account for flood-related disruptions, potentially reducing growth by 0.6 to 1%. Early estimates had pegged flood losses at Rs371 billion, but updated assessments indicate significantly higher economic impact.

The downward adjustment in GDP growth is expected to trigger revisions in the fiscal framework. The FBR’s tax collection target is set to be reduced from Rs14.13 trillion to Rs14.001 trillion, while non-tax revenue targets will also be lowered. This could affect the provinces’ anticipated revenue surpluses, estimated at Rs1,465 billion for the current fiscal year.

On the expenditure side, the federal government may not cut the overall Public Sector Development Programme (PSDP) allocation of Rs1 trillion but could slow down releases in the first half of the fiscal year (July–December) to maintain fiscal discipline and achieve the primary surplus target of 2.4% of GDP. Internal adjustments have already been made within PSDP projects, including Rs20 billion allocated to FBR digitization and development initiatives, such as new equipment deployment at border points.

Officials indicated that finalisation of the revised budgetary framework will be part of staff-level discussions with the IMF review mission, which are expected to pave the way for broader policy-level approvals and continuation of financial support under the EFF and RSF.

Monitoring Desk
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