Pakistan and the International Monetary Fund (IMF) have entered the policy-level phase of their ongoing economic review talks, with both sides working to finalise the draft of the “Memorandum of Economic and Financial Policies (MEFP)”, official sources said on Tuesday.

According to sources in the Ministry of Finance, the federal government has proposed revising the GDP growth target downward from 4.2% to around 3.5%, citing the adverse impact of recent floods on agricultural output and overall economic performance.

The two sides are also reviewing key macroeconomic indicators, with differing projections on growth, inflation, exports, remittances, and the current account deficit.

The IMF has presented fresh estimates during the policy discussions, part of the second half-year review under the current programme.

As per government projections shared with the IMF, inflation is expected to exceed 8% compared to the target of 7.5%, while foreign exchange reserves could reach $14.5 billion by year-end.

Remittances are projected by the government to increase from the target of $39.4 billion to $42 billion, whereas the IMF expects them to remain limited to $35.7 billion.

On the trade front, Pakistan aims to push exports to $34 billion, though the IMF estimates exports could stay below $33 billion.

The current account deficit is likely to remain around $500 million, considerably lower than the earlier projection of $2.1 billion, according to the latest briefing.

However, IMF estimates place the deficit closer to $1.49 billion.

Finance Minister Muhammad Aurangzeb is expected to hold final round discussions with the IMF mission to conclude the policy-level engagement, paving the way for the next tranche under the ongoing loan programme.