ISLAMABAD: Pakistan plans to seek greater flexibility from the International Monetary Fund ahead of finalizing its next federal budget, as the government grapples with slowing investment and renewed external pressures.
Prime Minister Shehbaz Sharif is expected to raise the issue during meetings on the sidelines of the World Economic Forum in Davos, including a scheduled meeting with IMF Managing Director on Jan. 21, officials said. Islamabad is pushing for a softer approach to fiscal targets under the $7 billion Extended Fund Facility and the $1.4 billion Resilience Sustainability Facility, which run through September 2027.
Senior officials said the government wants additional space in the 2026-27 budget to revive economic growth and prepare for an exit from the IMF program by 2027-28. Deputy Prime Minister Ishaq Dar is leading a committee tasked with developing the exit strategy.
Officials acknowledged that foreign direct investment has dropped 43%, while the current account posted a $1.2 billion deficit in the first half of the fiscal year. Analysts warn the investment-to-GDP ratio may fall to record lows.
The Finance Ministry, however, said the economy is stabilizing, projecting growth near 4%, above the IMF’s revised forecast of 3.25% to 3.5%. Remittances are expected to reach $42 billion by June 2026.
The IMF review mission is due in late February or early March to conduct the third review and unlock the fourth tranche, which will also shape the 2026-27 budget framework.
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