The federal government has set the exchange rate at Rs290 per dollar for the upcoming fiscal year’s budget, slightly stronger than the current year’s Rs295 rate, to improve foreign aid and loan repayment calculations. This adjustment, coupled with lower policy rates, could help reduce Pakistan’s debt servicing burden, with experts estimating savings of over Rs1.4 trillion compared to the current fiscal year.
The International Monetary Fund (IMF) began virtual discussions on Pakistan’s 2025-26 budget today, focusing on taxation measures, fiscal targets, and structural reforms. Originally planned as in-person talks, the IMF mission’s visit was delayed due to regional security concerns but is now expected by the weekend. The virtual talks will continue until May 16, followed by policy-level negotiations in Islamabad until May 23.
Finance Minister Muhammad Aurangzeb confirmed the budget will be finalized in the next three to four weeks, with the official presentation scheduled for June 2. The IMF has set ambitious targets, including a 1.6% primary budget surplus (Rs2 trillion above non-interest expenses) and tax collection of Rs14.3 trillion (11% of GDP). The total federal budget is projected at Rs18 trillion, with key allocations including Rs921 billion for development and a 15-18% increase in defense spending.
The IMF’s new mission chief, Bulgarian economist Iva Petrova, will lead discussions alongside outgoing chief Nathan Porter. The lender will assess Pakistan’s progress on reforms, including tax base expansion, privatization, and energy sector improvements. Despite a Rs830 billion tax shortfall in the first 10 months, the government remains committed to fiscal consolidation, with provinces exceeding IMF surplus targets.
Petroleum prices are also expected to drop, with petrol likely to decrease by Rs3.5 per litre and diesel by Rs7 per litre from May 16, providing some relief amid ongoing economic challenges.
Also read: Pakistan set for petrol and diesel price cuts amid global oil decline
