International Monetary Fund and Pakistan have started early virtual consultations for the upcoming Budget 2026-27, focusing on key fiscal targets and economic reforms.

According to official sources, discussions are underway to finalise major policy directions for the next financial year, with emphasis on reducing financial pressure and improving revenue generation in Pakistan.

IMF pushes for subsidy cuts

The IMF has reportedly urged the government to avoid subsidies on petroleum products. It argues that timely adjustment in fuel and energy prices is necessary to prevent fiscal imbalance and reduce the burden on the national budget.

The lender has also recommended immediate implementation of regulatory proposals related to electricity and energy tariffs, suggesting that pricing reforms should be aligned with market conditions.

Tax reforms and spending control

In addition, the IMF has called for a reduction in tax exemptions and concessions in the upcoming budget. Authorities are considering proposals to expand the tax base, reduce sales tax exemptions, and cut unnecessary government expenditures.

Officials said efforts are also being made to increase the tax-to-GDP ratio by at least 1 percent, along with measures aimed at reducing the country’s growing debt burden.

Growth outlook remains cautious

Despite tight fiscal conditions, sources suggest that economic reforms and improving global conditions may support moderate growth in the medium term. The GDP growth target is expected to remain around 5.5 percent for the coming fiscal year.

Experts believe the ongoing talks will play a crucial role in shaping Pakistan’s economic direction, especially as the government balances public relief measures with IMF-backed fiscal discipline.