Pakistan Misses IMF Cash Surplus Target by Rs182 Billion

Pakistan Misses IMF Cash Surplus Target by Rs182 Billion Due to Punjab’s Performance

Pakistan has failed to meet a major condition of the International Monetary Fund (IMF) to generate Rs342 billion in cash surplus from the four provincial governments. This shortfall, driven by Punjab’s underperformance, reached Rs182 billion, falling 53% short of the target in the first quarter of the fiscal year.

According to preliminary federal government data, the provinces collectively posted a cash surplus of Rs160 billion, missing the Rs342 billion target. This shortfall underscores the difficulties Pakistan faces in meeting the $7 billion IMF Extended Fund Facility (EFF) conditions. Punjab’s inability to meet its target resulted from the retirement of its commodity-related commercial debt, which reduced its surplus.

Challenges in Meeting IMF Conditions

Despite missing the cash surplus target, provincial governments did meet another important IMF condition—collecting Rs213 billion in taxes, exceeding the Rs184 billion target by Rs29 billion. However, the cash surplus shortfall is the third major IMF condition that Pakistan has missed so far. Previously, the federal government failed to meet the Federal Board of Revenue (FBR) target of Rs2.652 trillion and a Rs10 billion collection from traders, which yielded only Rs1 million.

The IMF set a goal for the provincial governments to generate Rs1.217 trillion in cash surplus for the current fiscal year. For the first quarter, the target was Rs342 billion, but Punjab’s inability to meet this goal caused the significant shortfall. Provincial spending surged, particularly on current expenditures, which increased by 28% year-on-year.

Impact on the $7 Billion IMF Deal

The IMF’s $7 billion EFF aims to improve fiscal discipline, reduce Pakistan’s debt burden, and re-balance relations between the federal and provincial governments. However, the underperformance at the provincial level raises concerns about meeting the overall fiscal targets set by the IMF.

Sources revealed that the provinces spent Rs1.75 trillion in the first quarter, a 33% year-on-year increase. Most of this spending was on current expenditures, while development spending rose by only 4%. The provinces also generated Rs213 billion in independent revenue, up 22% from the previous year, largely through sales tax on services.

Looking Ahead: Fiscal Challenges

Pakistan’s ability to meet the IMF’s conditions depends heavily on both federal and provincial fiscal performance. The National Fiscal Pact, agreed upon by the IMF, the federal, and provincial governments, requires greater collaboration to meet cash surplus targets and enhance revenue collection.

The IMF staff report acknowledged the risks of slippage at the provincial level, noting that provincial governments must play a more active role in fiscal performance through both revenue mobilization and spending restraint. The report also stated that evolving conditionality might be necessary to address these emerging challenges.