IMF hands Pakistan first MEFP draft as staff-level agreement talks enter final stretch

The International Monetary Fund has shared the first draft of its Memorandum of Financial and Economic Policies (MEFP) with Pakistani authorities, moving review talks towards negotiations on the measures needed to reach a staff-level agreement, The News reported on Saturday (Geo TV, Profit Pakistan Today).

The visiting IMF review mission is expected to stay in Islamabad until around the middle of next week. If both sides reach consensus on the MEFP, a staff-level agreement will be struck; if not, the talks will continue virtually.

The Fund’s key concern is the breach of the power-sector circular debt target: the stock reached Rs1.675 trillion by the end of June 2026, above the agreed ceiling. The government has budgeted Rs830 billion in power-sector subsidies for FY27. The IMF has asked Islamabad to eliminate the cross-subsidy on electricity consumption of up to 200 units and replace it with targeted support through the Benazir Income Support Programme from January 2027. Legislation on the Sovereign Wealth Fund is expected to be approved by Parliament.

On revenue, the Federal Board of Revenue’s Rs15.264 trillion annual tax target will stay unchanged after the FBR beat its first-quarter target by Rs27 billion. The IMF is also pushing a higher current account deficit projection of up to $4 billion for FY27, against the Finance Ministry’s $2.7 billion estimate; the National Economic Council’s Annual Plan, chaired by Prime Minister Shehbaz Sharif, projects $3.6 billion — $3.599 billion if a Gulf ceasefire deal materialises.

Pakistan’s current account deficit narrowed 36% to $543 million in July–August FY27, per the State Bank of Pakistan. The mission has also undertaken Article IV consultations; authorities expect GDP growth of around 4%, while the SBP projects 3.5–4.5% and the IMF sees average inflation at 8.5–9.5% against the government’s 8.2%.

Sources: Geo TV, Profit Pakistan Today