Pakistan and the International Monetary Fund (IMF) have discussed measures to accelerate reforms in the energy sector, contain circular debt and manage the country’s external financing needs, officials familiar with the talks said on Tuesday.
During the meetings, the IMF called for faster implementation of energy-sector reforms and urged Pakistan to meet agreed targets for containing circular debt, according to the officials.
Pakistan briefed the lender on progress in energy-sector reforms, noting the sector has been impacted by the tense regional situation. Under the zero-inflow target, Pakistan aims to keep circular debt in the energy sector at around Rs. 1.6 trillion, the officials said.
The Pakistani side also briefed the IMF on external debt repayments and financing requirements for the current fiscal year. Pakistan expects to obtain about $15 billion in foreign financing during the fiscal year, while its total external debt repayments are projected at about $21.5 billion, including around $3.5 billion in interest payments.
Pakistan made $2.2 billion in external debt payments in July, including $1.4 billion in Chinese commercial loans and $800 million in other external obligations, according to the officials. The government told the IMF that external repayment pressure is expected to ease over the remainder of the fiscal year.
Pakistan’s external debt repayments totaled $26.5 billion in the previous fiscal year, meaning the country expects to pay about $5 billion less this year, the officials said.
The government also briefed the IMF on measures taken to strengthen foreign exchange reserves, including timely financial support from Saudi Arabia. The State Bank of Pakistan has purchased about $28 billion from the foreign exchange market over the past three years, officials told the IMF. Of that amount, around $9 billion was purchased during the 2025-26 fiscal year.
Agricultural income tax
The IMF also raised concerns over targets for collecting income tax from the agricultural sector during the ongoing discussions. The federal government supported the position of farmers during the talks, arguing that high production costs have left many farmers operating under financial pressure.
The government told the IMF that most farmers in Pakistan are not sufficiently prosperous to bear significant income-tax obligations, while production costs have continued to rise because of the tense regional situation. Provincial governments are taking measures to increase agricultural income-tax collections, officials said.
The Federal Board of Revenue also briefed the IMF on its tax-collection digitalization initiatives. Pakistan additionally provided details on efforts by provincial governments to increase non-tax revenue and achieve targeted fiscal surpluses, according to the officials.
The two sides are scheduled to hold a special session on Pakistan’s automobile policy as part of the ongoing negotiations.