The federal government has announced plans to take the International Monetary Fund (IMF) into confidence over the recent escalation in tensions with India, particularly if the situation triggers a notable rise in defence spending. The decision comes ahead of formal negotiations with the IMF set to begin on May 14, as Islamabad readies its budget for the fiscal year 2025-26.
Finance ministry sources confirmed that upcoming consultations will focus on Pakistan’s budgetary framework, encompassing revenue targets and spending projections. Officials indicated that any potential increases in military expenditure due to the border tensions will be transparently conveyed to the IMF to ensure smooth negotiations and avoid misunderstandings.
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Simultaneously, the government is considering an ambitious tax revenue target exceeding Rs14,000 billion for the next fiscal year, with a plan to maintain the tax-to-GDP ratio at 11 percent, in line with IMF benchmarks. The controversial super tax, heavily criticized by the business community, is also under review amid concerns about its distortionary impact and the high tax burden on certain sectors.
These talks are expected to play a pivotal role in finalising the next budget, as Pakistan aims to secure a new, longer-term IMF programme following the recent completion of its stand-by arrangement. Updates on tax reforms, energy sector restructuring, and state-owned enterprise reforms will also be shared during the discussions.
