Islamabad, May 21 (PTI) Cash-strapped Pakistan has committed to a primary surplus target of 2 per cent of gross domestic product in FY2027, the IMF said Thursday after its team wrapped up a week-long visit to the country ahead of the budget.

The International Monetary Fund (IMF) mission, led by Iva Petrova, was in Islamabad from May 13 to 20, focusing on “recent economic developments, reform implementation, and the budget strategy for fiscal year 2027,” according to a statement by the IMF.

The discussions with Pakistan authorities covered ongoing structural reforms, including in the energy sector and state-owned enterprises, product market liberalisation, and financial sector reforms aimed at supporting durable growth and attracting high-quality private investment, it said.

The statement quoted Petrova as saying that “constructive discussions” were held with authorities on economic developments, including disruptions from the West Asia conflict, the upcoming budget formulation and progress on the reform agenda under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

“The authorities reaffirmed their commitment to a primary surplus target of two per cent of gross domestic product (GDP) in FY2027, which will support fiscal sustainability and continue to build resilience,” she said.

“The envisaged gradual fiscal consolidation will be supported by efforts to broaden the tax base, improve tax administration, enhance spending efficiency and public financial management at both federal and provincial levels,” she said. The World Bank has revised Pakistan’s GDP growth projection for FY2026 down to 3 per cent. An April 2026 report by the World Bank estimates Pakistan’s economy grew by 3.1 per cent in FY2025.

Pakistan is heavily dependent on the IMF for stabilising external payments. Earlier this month, the fund approved disbursements of about USD 1.1 billion from the EFF and USD 220 million from the RSF, bringing total payouts under the two arrangements to roughly USD 4.8 billion.

The Fund said that the State Bank of Pakistan (SBP) reiterated its commitment to maintaining an appropriately tight monetary policy stance to anchor inflation expectations and “will continue to closely monitor potential second-round effects from energy price increases.” Also, exchange rate flexibility should continue to serve as a key shock absorber, and efforts should continue to build a deeper foreign exchange interbank market, it said.

The next mission consultation and EFF and RSF reviews is expected to take place in the second half of 2026. PTI SH NPK NPK

Primary surplus target and fiscal consolidation shape Pakistan's IMF-backed reform agenda for budget planning and sustainability. Pakistan reaffirmed a fiscal consolidation strategy centred on a primary surplus target of 2 per cent of GDP in FY2027, in discussions with the IMF ahead of the budget cycle. The consultations covered reform implementation and the FY2027 budget strategy under the Extended Fund Facility and the Resilience and Sustainability Facility, with emphasis on fiscal sustainability and resilience. The reform agenda included broadening the tax base, improving tax administration, enhancing spending efficiency and strengthening public financial management, alongside structural reforms in energy, state-owned enterprises, product market liberalisation and the financial sector.