The International Monetary Fund (IMF) has urged Pakistan’s Special Investment Facilitation Council (SIFC) to reconsider granting tax exemptions for international investment projects, including the $2 billion Chaghi-Gwadar railway track initiative. This call from the IMF comes as Pakistan works to secure the next $1 billion tranche under the ongoing $7 billion Extended Fund Facility (EFF).
Sources indicate that the IMF delegation expressed concerns that offering tax exemptions for international investments would hinder Pakistan’s ability to generate revenue. The government had hoped to attract investment from Gulf countries for the construction of the Chaghi-Gwadar railway, a critical project designed to transport minerals from the Reko Diq region to Gwadar. However, the IMF’s stance is clear: no tax exemptions should be granted for international investments.
Officials briefed the IMF delegation, explaining that the SIFC is playing a pivotal role in facilitating investments and overseeing the development of this key infrastructure project. The government has already conducted a feasibility study in collaboration with the Ministry of Finance, Railways, and SIFC. However, Gulf countries have expressed interest in the project under the condition of receiving government guarantees for their investments—something Pakistan is hesitant to provide due to its existing financial obligations under the loan program.
Alongside these developments, Pakistan continues to negotiate with the IMF over other crucial economic reforms. The Ministry of Finance and the Law Ministry are engaged in discussions to amend the Sovereign Wealth Fund as part of these efforts.
In addition, Pakistan has made progress in talks with the IMF regarding energy sector reforms. On Tuesday, it was reported that Pakistan had convinced the IMF to approve a reduction of 1.5 to 2 rupees per unit in electricity tariffs. However, the final decision on this tariff reduction is expected next month. The IMF has stressed the importance of a comprehensive privatization plan for the power distribution companies (Discos) to secure these tariff cuts. The IMF has also expressed dissatisfaction with the underperformance of Discos, citing them as a major obstacle to needed reforms in Pakistan’s energy sector.
