Pakistan has met a key IMF condition by reducing its budget deficit in the first quarter. This is due to a large increase in petroleum levy collection and cuts to subsidies and development expenses. However, two provinces, Punjab and Khyber-Pakhtunkhwa, have overspent their budgets.
The government has managed to show a primary budget surplus of Rs417 billion, which is more than the IMF required. This means that the government has earned more money from taxes than it has spent on everything except interest payments.
An IMF team will visit Pakistan on November 2 to review the government's progress. If the IMF is satisfied, it will release the next loan tranche of $710 million.
The government has also achieved some other positive results. Non-tax revenues, such as the petroleum levy, have increased by 115%. Tax collection has also increased by 25%, more than the IMF target.
However, the government's total net income, after transferring provincial shares, is not enough to finance interest payments and the defense cost. This means that the government has to borrow money to cover these expenses.
The provincial governments' fiscal performance has been poor. They have earned Rs1.37 trillion but spent Rs1.32 trillion, leaving a meager surplus of Rs51 billion. The worst performing province is Punjab, which has spent more money than it has earned.
The IMF has projected Pakistan's budget deficit at 7.6% of GDP for the current fiscal year. This is higher than the government's target of 6.5%.
The SBP Governor has said that the central bank has met all the conditions set by the IMF for the first review.
