IMF says next Pakistan funding review expected in second half of 2025

The IMF anticipates the next funding review for Pakistan in the latter half of 2025 and will continue talks with Pakistani officials to finalize budget terms for the 2026 financial year. The IMF's primary objective is to stabilize inflation within the State Bank of Pakistan's target range of 5-7%. Pakistani authorities have reaffirmed their dedication to fiscal consolidation, targeting a primary surplus of 1.6% of GDP in FY2026.

Analysis

The International Monetary Fund (IMF) is continuing its engagement with Pakistan, with the next funding review anticipated in the second half of 2025 and ongoing discussions regarding the FY2026 budget terms. A central objective for the IMF is to anchor Pakistan's inflation within the central bank's medium-term target of 5–7 percent, a critical measure for achieving macroeconomic stability. Concurrently, Pakistani authorities have reaffirmed their commitment to fiscal consolidation, targeting a primary surplus of 1.6 percent of GDP in FY2026, signaling a continued drive towards fiscal prudence. These developments, while framed with a "mildly positive" sentiment and a low market impact score of 0.3, underscore a medium-term pathway for economic adjustment rather than an immediate resolution, reflecting the persistent challenges and the extended timeline for realizing these fiscal and monetary goals.

Key Decisions for Investors

• Investors should closely monitor Pakistan's progress towards achieving the targeted 5-7% inflation range and the 1.6% primary surplus by FY2026, as these are key indicators of fiscal and monetary discipline.
• The H2 2025 IMF funding review will be a significant milestone; outcomes from this review and ongoing budget negotiations will provide further clarity on Pakistan's economic trajectory and policy adherence.
• Given the medium-term nature of these commitments, positions related to the Pakistani economy should be approached with a long-term perspective, factoring in potential volatility and the execution risks associated with the agreed-upon reforms.