Zafar Iqbal
The Ministry of Finance (MoF) has issued a detailed clarification regarding the new conditions set by the International Monetary Fund (IMF), underlining that these are not new demands but a reaffirmation of measures already agreed upon by the government under a phased medium-term reform agenda. According to the MoF, these reforms are to be implemented in a sequenced, step-by-step manner over the duration of the programme, which is scheduled to continue until late 2027.
The IMF’s own documents, uploaded on its website last week, acknowledge the phased approach, noting that test dates for two Structural Benchmarks (SBs) missed due to implementation delays are proposed to be reset. In addition, new SBs have been proposed to advance progress on key areas, including Federal Board of Revenue (FBR) and tax policy reforms, governance and anti-corruption measures, capital market development, power sector efficiency, State-Owned Entities (SOEs) governance, commodity market liberalisation, and improvements in regulatory and investment frameworks.
The IMF’s approach reflects a broader trend among multilateral institutions towards greater transparency. Full disclosure of agreed conditions, along with staff assessments of their implementation at each quarterly review, has become a prerequisite for the approval of subsequent tranche releases. The repeated use of the word “should” in the IMF staff appraisal documents of December 2025 highlights the Fund’s concerns over identified “substantial risks” to the programmes. These include uncertainties arising from the full impact of recent monsoon floods, global risks such as geopolitical tensions, tighter financial conditions, new trade measures, or weakening remittances and international aid inflows, as well as domestic pressures to ease policies and delay reforms, which could undermine programme progress.
From the perspective of both the business community and the general public, these risks underline the urgent need for stronger structural reforms, enhanced social protection and human capital programmes, and measures to build resilience against climate shocks. The Memoranda of Economic and Financial Policies (MEFP) include time-bound, sector-specific reforms that, while necessary, increase the political and fiscal pressures on the administration.
Among the most pressing reform measures is the shortfall in the performance of Captive Power Plants, amounting to 104 billion rupees. The government plans to cover this through reduced power subsidies enabled by lowering circular debt accumulation. The strategy involves borrowing 1.25 trillion rupees from 18 commercial banks, with interest and principal payments ultimately borne by consumers.
Revenue shortfalls have prompted the FBR, in consultation with the IMF, to pledge additional measures, including increasing federal excise duty on fertilizers and pesticides by five percent, introducing a FED on sugary drinks, and transitioning items from the eighth GST schedule to the general GST regime. The Agriculture Income Tax (AIT), though legislated, continues to yield meagre collections, necessitating timely exchange of data for inclusion in FBR income tax declarations.
Strengthening governance frameworks is another core requirement. This includes improving risk monitoring for public-private partnerships (PPPs), clarifying federal government institutions through a sectorisation study to implement a single treasury account, and ensuring all SOEs comply with the governance framework by August 2026. The privatisation of Pakistan International Airlines (PIA) is also expected to be completed by the end of the month.
Social protection measures have been expanded under the IMF programme. The Benazir Income Support Programme (BISP) will see unconditional cash transfers rise from 13,500 to 14,500 rupees per quarter starting next month, while health and education spending is set to scale up at both federal and provincial levels. In parallel, remittance mobilization will be pursued sustainably, without fiscal support, through the removal of costly payment system barriers.
Corruption and governance reforms remain critical. The IMF has emphasised an action plan to address vulnerabilities in the top 10 government departments identified with the highest corruption risks. This includes strengthening the right to information, judicial reforms, and publishing all inflows and incentives provided by the Special Facilitation Investment Council (SIFC) to attract foreign investment. The deadlines for these measures extend up to October 2026.
The IMF’s emphasis on structural reforms, fiscal discipline, and governance improvements places a significant political burden on an administration that has long moved past its honeymoon period. The reforms challenge entrenched elite capture of resources and existing expenditure priorities, requiring a level of commitment and consistency that has, so far, not been fully reflected in budgetary allocations or fiscal operations reported in the first quarter of the current year.
For the business community, these reforms signal potential stability in revenue collection, power sector efficiency, and regulatory clarity. Investors are particularly interested in transparent governance, streamlined PPP frameworks, and measures to ensure SOEs operate efficiently. Likewise, the general public stands to benefit from strengthened social protection, improved health and education coverage, and measures that reduce systemic corruption.
The successful implementation of the IMF programme will require careful sequencing of reforms, robust monitoring, and coordination between federal and provincial governments. Any delay or deviation risks undermining not only fiscal stability but also investor confidence and social equity. The phased approach provides flexibility, but the political will and administrative capacity to execute these reforms remain critical determinants of success.
In conclusion, Pakistan’s ongoing engagement with the IMF represents both an opportunity and a challenge. By adhering to the medium-term reform agenda, the country can strengthen its economic foundations, improve governance, and enhance social protection. However, achieving these objectives demands a sustained commitment to fiscal discipline, structural reform, and transparent governance—factors that are essential to ensuring that the benefits of the programme reach both the business sector and the broader population. The timelines, scope, and technical requirements of the reforms underscore that partial implementation or policy reversals could jeopardize progress, making political determination as important as economic strategy.
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