IMF Denies 'Grace Period' To Pakistan, Holds $1 Billion Loan Tranche On Concerns Over Fiscal Discipline
The international body threw light on Islamabad's failure to meet critical reform benchmarks such as revenue collection and budget rationalisation.
Pakistan's already splintering economy was met with another blow as the International Monetary Fund (IMF) mission left the country without signing the much-awaited Staff-Level Agreement (SLA) with Islamabad due to concerns over budget mismanagement, opaque spending, and rising defence expenditures amid unfulfilled pledges.
According to CNN-News 18 reports, the return of IMF to Washington without signing the SLA means that the next loan tranche for the country, valued at around $1 billion has been put on hold. Further, Pakistan's plea to be provided with "grace time" to fulfill their pending pledges was also denied by the IMF.
The international body threw light on Islamabad's failure to meet critical reform benchmarks such as revenue collection and budget rationalisation, even as Pakistan tried to justify the unmet targets to IMF by underlining the recent floods and the May 2025 conflict with India.
IMF's apprehension and mistrust grew thicker after noticing the country's additional defence expenditure of nearly $2–2.5 billion over the past six months. It also scrutinized the country's fiscal discipline and opaque spending mechanisms such as the creation of special funds for security operations.
As far as tax collections are concerned, Minister of State for Finance Bilal Kayani admitted that the Federal Board of Revenue was only able to collected PKR 11.74 trillion in fiscal 2025 against an annual target of PKR 12.9 trillion, missing both its revenue goal and the agreed tax-to-GDP ratio of 10.5%. Although, the ratio displayed slight improvement and rose 1.4% over last year, it missed IMF expectations, as per The Express Tribune reports.
Hence, the international financial institution viewed Pakistan's progress as insufficient in order to meet the critical reform benchmarks mentioned earlier.
While discussions are expected to continue, the exit of IMF sans signing an agreement with Pakistan has put the country's economy in a rather difficult spot, as it prohibits its access to IMF funds or source alternate funding from other global institutions.
