The International Monetary Fund (IMF) Executive Board has emphasized the need for Pakistan to implement the new $7 billion bailout package and broaden its tax base. The 37-month Extended Fund Facility (EFF) for Pakistan was approved by the IMF, with a $1 billion tranche already disbursed. In exchange for the bailout, Pakistan agreed to unpopular reforms, including widening its low tax base.
The IMF directors stressed the importance of sustained program implementation and additional revenue mobilization efforts by broadening the tax base and enhancing tax administration. They also emphasized the need to move away from Pakistan’s state-led growth model, strengthen the business environment, and ensure a more even playing field with freer competition to reverse the decline in living standards.
The IMF also highlighted the need for reforms to strengthen the fiscal framework, ensure energy sector sustainability, and enhance liquidity and debt management. The IMF program is seen as a critical anchor for structural reforms, and the implementation of sound policies over the past year has been critical to restoring economic stability, reducing near-term risks, and rebuilding confidence.
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The IMF’s recommendations include advancing State-Owned Enterprises (SOE) reform, scaling back distortive incentives, promoting a level playing field for all businesses, strengthening governance and anti-corruption institutions, and building climate resilience. The continued fiscal consolidation, enhanced revenue mobilization, and prudent expenditure management are seen as crucial for securing fiscal sustainability and reducing the crowding out of private investment.
The IMF also suggested increasing revenue mobilization by broadening the tax base and removing special sectoral regimes to create space for essential investments in human capital, infrastructure, and social spending. Timely energy tariff adjustments and deep cost-side reforms in the power sector were also highlighted as critical for securing the sector’s lasting viability and reducing its costs.
Overall, the IMF’s message emphasizes the need for Pakistan to implement a comprehensive reform plan, strengthen its fiscal framework, and create conditions for a stronger, more inclusive, and resilient growth.
