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IMF Links Salaried Class Relief to Spending Cuts; Defense Budget Exempted
IMF conditions salaried class relief on govt spending cuts; defense budget to rise amid geopolitical concerns. Provinces urged to boost revenue. President Zardari calls IMF program vital for economic stability.
ND
by News Desk
2025-05-23
IMF Links Salaried Class Relief to Spending Cuts; Defense Budget Exempted

The International Monetary Fund (IMF) has made relief for Pakistan’s salaried class conditional upon significant reductions in government spending, sources revealed as the IMF delegation concluded its visit on Friday. While Islamabad has decided to increase the defense budget in light of the current geopolitical situation, the IMF has raised objections to relief packages proposed for the export sector and called on provinces to reduce expenditures and enhance revenue collection.

The delegation, led by Jihad Azour, IMF Regional Director for the Middle East and Central Asia, held several meetings with Prime Minister Shehbaz Sharif and his team to discuss Pakistan’s financial roadmap. Pakistan has requested postponement of a proposed federal excise duty hike on fertilizers from 5 to 10 percent and a new 5 percent tax on pesticides, with the IMF expected to partially accommodate these requests.

Despite earlier efforts to reduce the number of government employees, salary and pension increases are expected to be minimal, reflecting a shift in the government’s approach. The final budget estimates, to be presented in Parliament on June 2, remain unclear, with virtual negotiations planned to continue post-presentation.

A senior government official highlighted that the revenue target in the upcoming budget will shape Pakistan’s economic direction for years to come, as efforts intensify to persuade the IMF to ease income tax rates for the salaried class. The Federal Revenue Service’s tax target is set above Rs 1.4 trillion, contingent upon proportional spending cuts.

Apart from the defense budget, which will be increased to meet security needs, other spending cuts are anticipated, particularly through reductions in debt repayments. The Finance Ministry and IMF have projected debt repayments of Rs 8.7 trillion, though this figure might be reduced to between Rs 8 and Rs 8.2 trillion.

The IMF has also urged provincial governments to cut expenses and generate additional tax revenue to help contain the national deficit. Furthermore, the government has secured US $1 billion in trade finance assistance for the current fiscal year ending June 2025.

In a separate development, the IMF delegation met with President Asif Ali Zardari to review Pakistan’s economic situation and ongoing IMF program. President Zardari acknowledged the program’s role in stabilizing the economy and expressed optimism that it would spur further economic development. He commended the IMF’s support in financial reforms and stressed the importance of continued bilateral cooperation.

The IMF delegation praised Pakistan’s ongoing reforms and the positive steps taken towards economic improvement, reinforcing the international body’s support for Pakistan’s path to fiscal stability.
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IMF

ShehbazSharif

PakistanEconomy

Budget2025
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