2025-05-18T08:12:00Z

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The International Monetary Fund (IMF) has recently announced a series of stringent new conditions that Pakistan must meet as part of its ongoing bailout program. With these additions, the total number of structural benchmarks and conditions imposed by the IMF has now climbed to 50. The announcement follows a comprehensive review of Pakistan's economic situation, emphasizing the need for urgent reforms to stabilize the country's financial framework.

Among the most significant new requirements is the need for parliamentary approval of a massive federal budget totaling Rs 17.6 trillion for the fiscal year 2025–26. This budget must align with the targets set forth by the IMF program and must be passed by June 2025. The government’s ability to draft and approve this budget will be crucial for securing continued support from the IMF and for addressing the severe economic challenges facing the nation.

Another notable condition is the reform of the Agricultural Income Tax at the provincial level. All four provinces in Pakistan are required to implement new laws by June that will cover essential aspects such as taxpayer identification and registration, a compliance improvement plan, communication campaigns, and the establishment of an operational return-processing platform.

In addition to these immediate fiscal measures, the government must also publish a comprehensive governance action plan that reflects the findings of the IMF’s Governance Diagnostic Assessment. This endeavor aims to improve transparency and accountability within the public sector, essential for restoring investor confidence and promoting economic growth.

Looking further ahead, the IMF has mandated that Pakistan devise a long-term financial sector strategy, which must be published and outline institutional and regulatory objectives beyond the year 2027. This strategic foresight is vital for ensuring sustainable growth in the financial sector and for safeguarding it against future economic shocks.

On the energy front, the IMF requires the government to issue a notification regarding annual electricity tariff rebasing by July to ensure that tariffs remain at cost-recovery levels. Similarly, a semi-annual Gas Tariff Adjustment Notification must be issued by February 2026 to prevent any imbalances in gas pricing that could affect the broader economy.

Furthermore, the IMF has called for the legislation to make the Captive Power Levy Ordinance permanent by the end of May. This ordinance is aimed at incentivizing industries to shift their energy use to the national grid, thus reducing the burden on independent energy sources.

One of the more controversial requirements includes the removal of the cap on the debt servicing surcharge, which must be legislated to eliminate the existing Rs 3.21 per unit ceiling by June. This move is expected to increase the financial burden on consumers but is seen as necessary to ensure fiscal health.

Pakistan is also required to prepare a phase-out plan for fiscal incentives related to Special Technology Zones and other industrial parks by the end of 2024, aiming to eliminate these incentives by 2035. In addition, the government must submit legislation to Parliament by the end of July to lift quantitative restrictions on the commercial import of used cars, specifically those that are up to five years old.

Finally, the IMF stipulates that out of the Rs 17.6 trillion budget, a significant allocation of Rs 1.07 trillion must be dedicated to development spending. This is crucial for fostering economic growth and infrastructure development in a country that has struggled with financial instability.

While the IMF's stringent conditions are aimed at stabilizing Pakistan's economy, they come with their challenges. The IMF has expressed concerns regarding the potential impact of rising tensions between India and Pakistan on the program's success. The staff-level report released by the IMF on Saturday cautioned that “rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten risks to the fiscal, external, and reform goals of the programme.” Thus, addressing both economic and geopolitical challenges will be critical for Pakistan's recovery and long-term stability.