Negotiations at the policy level between Pakistan and the International Monetary Fund (IMF) are scheduled to commence on Monday (today) for the disbursement of the next installment of $1 billion.

The discussions would focus on the budget for the upcoming fiscal year, as well as a consultative review of economic targets, sources said.

In July, Pakistan and the IMF finalised a three-year, $7 billion aid package designed to help the country establish macroeconomic stability and foster stronger, more inclusive growth.

The 37-month Extended Fund Facility programme includes six reviews throughout the duration of the bailout. The release of the next tranche, approximately $1 billion, will depend on the outcomes of the forthcoming performance review.

A key focus for Pakistan in this loan agreement is increasing the tax-to-GDP ratio, which is essential for stabilising the economy and managing debt. In 2024, the salaried class emerged as the third-largest contributor to income tax, ranking behind banks and the petroleum sector while surpassing textile exporters.

The economic review negotiations with the IMF would continue until March 15 and would be conducted in two phases

Such negotiations are expected to conclude by the end of next week, they said and added that the IMF mission would release an initial statement regarding the negotiations upon the completion of the review.

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The final report from the economic review mission would be presented to the IMF Executive Board, which will subsequently decide on the final approval for the $1 billion installment.

In the technical phase of negotiations, the Fund demanded that Pakistan take further action. A proposal for a surcharge of Rs2.8 on electricity was put forward, along with a recommendation to gradually increase the petroleum levy from Rs60 to Rs70 per liter.

A proposal for implementing a carbon tax for environmental protection was presented to the economic team, however, the government has opposed all tax measures except for the additional surcharge on electricity.