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The IMF says government finances are doing better than before the war, with regions reporting extra money.
BY Mahnoor | 13-05-2026
ISLAMABAD:
The government said on Tuesday that it collected Rs371 billion (45%) more in petroleum levy during the first nine months of this fiscal year. The IMF predicts Pakistan’s financial situation will be better than before the war.
In nine months, the government collected Rs1.205 trillion in petroleum taxes, almost the same as all of last year. Now, drivers pay Rs117.5 per liter in taxes, which fills the government’s funds.
Pakistan is in a good spot before talking to the IMF about its budget. This is because of very high taxes on petroleum, much lower interest costs (interest rates are down by half), and provinces having more cash than ever. The IMF starts budget talks today (Wednesday), but they’ll also look at other things. They will check if Pakistan has made progress on changing laws to reduce government involvement in businesses and open up the sugar industry.
The mission will decide next year’s income and spending goals and check on law changes. They’ll also meet to talk about what happens to banks after interest-based loans stop in 2028, as the constitution says. The IMF will ask for an update on opening up the sugar industry, which is now tightly controlled to help sugar companies. The budget that the IMF approves will then go to the National Assembly next month for a vote.
Talks will also happen with the provinces to make sure they create Rs1.64 trillion in extra money next year and collect almost Rs1.78 trillion in taxes, sources say.
The IMF’s new report says Pakistan’s financial situation is better than expected from before last June’s war. This means the Middle East conflict hasn’t hurt Pakistan’s money much because the government gained back money from global oil prices and taxes on oil products.
In the last budget, the government aimed for a budget deficit of 3.9% of the country’s total income (a little over Rs5 trillion). But, the IMF’s report reveals the deficit might be as low as 3.2% of the country’s total income, which is about Rs900 billion better than expected. This means the federal and provincial governments could have afforded to give people relief instead of increasing taxes, but mostly the richer provinces have that ability.
The IMF report indicates that the primary budget surplus, which is the revenue left after interest payments, might stay at 2.5% of the GDP this fiscal year. This is about Rs50 billion more than the IMF expected. However, government officials mentioned that the 2.5% figure is just an initial estimate of the primary surplus.
Talks about the 28th amendment to the constitution are back on, including possible changes to how resources are shared between the central government and the four provinces.
The finance ministry shared financial figures for July to March, matching what the IMF predicted. They collected Rs1.205 trillion in petroleum taxes during this time, which is 45% (Rs371 billion) more than last year and just Rs15 billion less than the total collected in the previous full year.
From July to March, the total budget shortfall was Rs856 billion, which is 0.7% of the country’s total economic output. This happened because of increased taxes on petroleum, lower interest payments, and record-high cash surpluses from the provinces. Interest payments for nine months were Rs4.95 trillion, a decrease of Rs1.5 trillion or 23%. Total federal spending decreased by only Rs897 billion (8%) during this time.
The four provinces together had a cash surplus of Rs1.63 trillion, Rs583 billion (55%) more than last year. Punjab’s surplus was Rs824 billion, half of the total. Because of the higher provincial surplus and increased taxes on petroleum, the main budget surplus was Rs4.1 trillion, or 3.2% of the country’s GDP.
IMF mission plan
The budget team will also check how Pakistan is figuring out the cost of discounts on money sent from overseas. Pakistan told the IMF they’re studying what makes it hard to send money and how much it costs. They’ll have a plan ready by the end of the month. The central bank and finance ministry will then make sure that the money spent on these discounts doesn’t go over the budget each year.
Sources say the IMF will get an update on the government’s plan for the financial industry. This is happening because a change to the constitution will stop the current interest-based system in 2028. A top committee run by the finance ministry is finishing the financial plan for after 2027. The committee has told banks what they need to do starting in 2028, and the plan must be ready for the IMF to review by June this year.
The budget review will also check on the plan to lower circular debt and make sure power subsidies stay under 890 billion rupees in the next budget, unless the IMF agrees to a higher limit. The IMF will also want to know about any more electricity price hikes because of the Middle East conflict’s impact on prices. Sources say the IMF might approve a plan for gas sector debt and look at planned gas price increases starting in July. The government will also update the IMF on progress in removing general electricity subsidies and moving to targeted subsidies through the BISP program. A new government policy is introduced to open the sugar sector to competition.
