AI Generated Summary
- These conditions, detailed in a staff-level report released on Saturday, are aimed at ensuring fiscal discipline, reform continuity, and economic sustainability—but arrive at a politically sensitive time marked by rising tensions with neighboring India.
- In a significant development, the International Monetary Fund (IMF) has laid out 11 new conditions for Pakistan as part of its ongoing bailout programme, pushing the total number of stipulations to 50.
- Another major stipulation is an increase in the debt servicing surcharge on electricity bills, a move likely to impact household and industrial consumers alike.
In a significant development, the International Monetary Fund (IMF) has laid out 11 new conditions for Pakistan as part of its ongoing bailout programme, pushing the total number of stipulations to 50. These conditions, detailed in a staff-level report released on Saturday, are aimed at ensuring fiscal discipline, reform continuity, and economic sustainability—but arrive at a politically sensitive time marked by rising tensions with neighboring India.
The IMF warned that escalating hostilities between India and Pakistan could jeopardize the programme’s objectives. “Rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten risks to the fiscal, external, and reform goals of the programme,” the report stated.
Key Economic Conditions
The new IMF requirements include the parliamentary approval of a Rs 17.6 trillion federal budget for the upcoming fiscal year. This includes Rs 1.07 trillion earmarked for development spending. Another major stipulation is an increase in the debt servicing surcharge on electricity bills, a move likely to impact household and industrial consumers alike.
Additionally, the IMF has demanded legislation to lift the current cap of Rs 3.21 per unit on the debt service surcharge, criticizing it as a mechanism that unfairly penalizes responsible consumers while propping up inefficiencies in the power sector.
In the energy domain, four new conditions have been introduced. These include the annual rebasing of electricity tariffs by July 1 to ensure cost recovery, and a semi-annual gas tariff adjustment notification by February 2026. The government is also expected to pass legislation making the captive power levy ordinance permanent—a move intended to push industries onto the national power grid.
Provincial and Structural Reforms
The IMF has also turned its attention to provincial tax regimes. All four provinces are now required to implement new Agriculture Income Tax laws by June. These reforms must include operational platforms for processing returns, taxpayer registration, and awareness campaigns to ensure compliance.
Furthermore, the government has been instructed to release a governance action plan grounded in the IMF’s Governance Diagnostic Assessment. A long-term strategy for the financial sector post-2027 must also be prepared and made public, outlining reforms to the regulatory environment from 2028 onwards.
Special Zones, Import Policy Overhaul
In a significant shift in investment policy, Pakistan must draw up a plan to fully phase out incentives for Special Technology Zones and other industrial parks by 2035. The plan is expected by the end of this year.
On a more consumer-focused front, the IMF has called for legislation that would lift restrictions on the import of used vehicles. Currently, only vehicles up to three years old can be commercially imported. Under the new guidelines, vehicles up to five years old would be permitted, a move likely to bring relief to consumers seeking more affordable transportation options.
Rising Defence Expenditure and Regional Tensions
The IMF report also highlights a notable increase in Pakistan’s defence spending, projected at Rs 2.414 trillion for the next fiscal year—an increase of Rs 252 billion, or 12%. However, the government has signaled an even higher allocation exceeding Rs 2.5 trillion, reportedly in response to recent confrontations with India.
Tensions flared earlier this month after India launched ‘Operation Sindoor’ on May 7, targeting terror infrastructure in response to the April 22 Pahalgam attack that killed 26 people. Pakistan retaliated with attempted strikes on Indian military bases on May 8, 9, and 10. The conflict de-escalated on May 10 following mutual understanding between the two nations.
Despite the regional volatility, the IMF noted that financial markets have remained relatively stable, with stock indices holding firm and only moderate widening in spreads.
Looking Ahead
As Pakistan works toward securing the next tranche of the IMF bailout, the growing list of conditions underscores the delicate balance Islamabad must maintain between meeting international financial obligations and managing internal political and regional pressures. With a looming June deadline for many of the reforms, the coming weeks will be critical for the nation’s economic trajectory.
