Pakistan’s budget offers too narrow a path to fiscal targets

Research evidence excerpt

Pakistan’s budget offers too narrow a path to fiscal targets

J P M O R G A N Asia Pacific Economic Research

18 June 2026

Pakistan’s budget offers too

narrow a path to fiscal targets

• The government remains committed to a 2% of GDP primary surplus EM, Economic and Policy Research

target, underscoring continued fiscal discipline. Mahmoud Harb

• A provincial spending squeeze should keep the IMF program broadly on (65)mahmoud.harb@jpmorgan.com6882-1640

track, while tax revenue shortfalls are likely to persist.

JPMorgan Chase Bank, N.A., Singapore Branch

• The strongest part of the fiscal adjustment momentum under the ongoing

IMF program seems to be now behind us.

The bottom line: Pakistan’s draft federal budget for FY2026/27 signals a continued

commitment to fiscal targets under the ongoing IMF program, despite challenges

from the global energy shock. However, it lays out a narrow path to achieving these

objectives. While a substantial tax effort is needed to offset a larger-than-expected

revenue shortfall in FY2025/26, the government’s strategy relies mostly on

administrative and compliance measures and avoids major tax policy changes,

making new shortfalls likely. Much of the adjustment burden will shift to provincial

and capital spending. We expect the fiscal targets to be achieved and the IMF to remain

on track. However, we see increased risks of slippage amid signs of austerity fatigue,

and believe large primary surpluses are unlikely to outlast the current IMF program.

Discipline, but not transformation

The FY2026/27 draft budget released by the Pakistani government last week

reaffirmed adherence to the adjustment path agreed under the ongoing 2024-

2027 IMF-supported program, despite the adverse external environment. The