IMF sees limited impact of floods on Pakistan’s economy, revenue targets remain largely on track: report

The International Monetary Fund (IMF) does not anticipate major setbacks to Pakistan’s economic growth or revenue collection this fiscal year, despite recent floods, The Express Tribune reported, citing government sources. Except for Punjab, provincial authorities have reported limited economic losses, reducing the likelihood of downward revisions to fiscal targets.

Pakistani authorities have assessed flood-related damage along three rivers, while evaluations of infrastructure destroyed or damaged in Punjab remain ongoing. During a kick-off meeting with Finance Minister Muhammad Aurangzeb, the IMF delegation reviewed initial provincial assessments. The governments of Balochistan, Sindh, and Khyber Pakhtunkhwa (K-P) shared their estimates separately.

Based on these preliminary inputs, the IMF indicated no significant economic losses but said it would wait for detailed damage assessments. The lender also noted that the floods had not impacted tax revenues and urged the Federal Board of Revenue (FBR) to share visible results from its ongoing transformation plan, approved last year and backed with over Rs55 billion for initiatives to improve tax collection.

The observations follow Prime Minister Shehbaz Sharif’s request that the IMF consider flood impacts during review talks. Authorities indicated that contingency funds could cover flood-related expenditures, likely avoiding the need for additional resources.

Pakistan’s internal assessments suggest limited economic disruption, with GDP growth still projected between 3.7% and 4%, slightly below the 4.2% target. The Planning Commission estimates total flood-related losses at around Rs360 billion, roughly 0.3% of GDP.

Resilient crop yields helped offset losses. Punjab’s rice and sugarcane sowing exceeded initial projections, mitigating potential reductions in output. The current account deficit is not expected to rise, and additional imports due to floods are not projected.

During separate meetings, the IMF raised concerns over delayed publication of the Governance and Corruption Diagnosis Assessment report. Authorities assured the lender the report would be released within the week. 

The report identifies shortcomings in judicial, administrative, and corporate governance and includes over a dozen recommendations to strengthen rule of law and judicial integrity.

The IMF also highlighted low provincial spending on health and education. K-P officials attributed low health spending to slow recruitment of doctors. Provincial governments indicated no need for extra resources for flood rehabilitation, except Punjab, which is preparing a comprehensive support package for affected residents. Sindh estimated losses at Rs40-50 billion, while K-P reported damages around Rs30 billion.

Meanwhile, the FBR is struggling to meet revenue targets. As of September 30, the end of the first fiscal quarter, the agency needed over Rs500 billion to meet its Rs3.083 trillion quarterly target. Income tax returns filed stand at 3.2 million, compared to 7.7 million in 2024.

To ease compliance, the FBR extended exemptions and deadlines, including tax-free sugar imports until November and the real-time electronic transmission of sales tax receipts by another two months, signaling challenges in enforcing the original deadlines.

The IMF-Pakistan review discussions, which began on September 25, are scheduled to continue until October 8. A successful conclusion could unlock two loan tranches totaling over $1.2 billion under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).