Pakistan, IMF Revise Targets Amid Rs650B Flood Losses

Pakistan and the International Monetary Fund (IMF) are gearing up to revise fiscal targets for the current financial year, prompted by updated evaluations of flash flood losses estimated at Rs650 billion. These adjustments are poised to impact the Federal Board of Revenue (FBR)’s tax collection and non-tax revenue targets, alongside macroeconomic projections under the $7 billion Extended Fund Facility (EFF) and Resilience Sustainability Facility (RSF).

Initial evaluations suggested minimal flood impact, but the Rapid Need Assessment (RNA) across all four provinces now pegs total losses at approximately Rs650 billion. Officials cautioned that this figure could escalate, as international donors—including the World Bank, Asian Development Bank, European Union, and UNDP—have yet to validate provincial damage estimates.

Government sources confirmed that the preliminary GDP growth forecast of 4.2% for FY26 may be trimmed downward by 0.6 to 1% to reflect flood disruptions. Early projections had estimated flood losses at Rs371 billion, but revised assessments reveal a far greater economic toll.

This downward GDP adjustment will necessitate recalibrations in the fiscal framework, with the FBR’s tax collection target potentially dropping from Rs14.13 trillion to Rs14.001 trillion, and non-tax revenue targets also facing reductions. Such changes could erode the provinces’ projected revenue surpluses, estimated at Rs1,465 billion for the current fiscal year.

On the expenditure front, the federal government is unlikely to slash the Public Sector Development Programme (PSDP) allocation of Rs1 trillion, but may delay releases in the first half (July–December) to uphold fiscal discipline and meet the primary surplus target of 2.4% of GDP. Internal PSDP adjustments have already been implemented, including Rs20 billion earmarked for FBR digitization and development initiatives, such as equipment deployment at border points.

Officials indicated that the finalization of the revised budgetary framework will form a core part of staff-level discussions with the IMF review mission, paving the way for policy approvals and continued financial support under the EFF and RSF.