Punjab’s inability to meet cash surplus targets has placed Pakistan’s $7 billion IMF deal under strain, falling short by Rs182 billion against a goal of Rs342 billion in the first quarter of FY2025. This shortfall underscores significant challenges for Pakistan in adhering to the IMF’s conditions for fiscal discipline and economic stability.
Pakistan’s four provinces managed only Rs160 billion in cash surplus cumulatively, attributed largely to Punjab’s reduced contributions after paying off commodity-related debt. Despite the shortfall, the provinces exceeded the IMF’s tax collection target, raising Rs213 billion against a Rs184 billion goal during the July-September period.
The $7 billion IMF Extended Fund Facility (EFF) requires Pakistan to meet stringent quarterly targets to strengthen fiscal discipline, rebalance federal-provincial relations, and ensure debt sustainability.
The agreement includes a Rs1.217 trillion cash surplus target from the provinces for the current fiscal year, with Rs342 billion expected in Q1 alone. Punjab’s shortfall marks the third missed target in the IMF deal, following unmet FBR collection and trade tax targets.
The Express Tribune reported that provincial expenditures reached Rs1.75 trillion in Q1, a 33% year-on-year increase. Current expenditures surged by 28% to Rs1.22 trillion, while development spending saw a modest 4% rise to Rs257 billion.
Revenues, mainly from the National Finance Commission (NFC) award, enabled provinces to increase spending flexibility, with federal transfers climbing 44% to Rs1.6 trillion.
The IMF report emphasizes the need for a National Fiscal Pact to assign certain federal spending responsibilities to provinces, enhancing provincial accountability. It cautions that slippages at the provincial level could jeopardize the program’s success, urging provinces to prioritize revenue mobilization and expenditure control.
With only partial success in meeting the IMF’s stringent requirements, Pakistan faces mounting pressure to adhere to nearly 40 conditions under the IMF deal. The path forward may necessitate strengthened provincial cooperation and revised fiscal strategies, as the IMF warns that unmet fiscal targets could complicate economic recovery efforts and impact Pakistan’s fiscal sustainability.
