IMF Sets New Conditions for Pakistan’s Financial Aid
Islamabad: The International Monetary Fund (IMF) has added 11 more conditions for Pakistan regarding the next tranche of its relief program. There’s a concern that escalating tensions with India could jeopardize the country’s fiscal goals, according to a media report from Sunday.
Among the new requirements, Pakistan must secure Congressional approval for a revamped budget of Rs 17.6 trillion, increase electricity rates, and lift restrictions on the import of used cars that are older than three years.
A report released by the IMF indicates that if the current tensions between India and Pakistan persist or intensify, it may pose significant risks to fiscal, external, and reform objectives outlined in the program.
It’s noted that in the past two weeks, tensions have surged between the two nations, but the market response has been somewhat muted; the stock market has increased slightly, even amid recent challenges.
According to the report, the defense budget for the next fiscal year is pegged at Rs 2.414 trillion, marking an increase of Rs 252 billion, or about 12%. The government, however, is forecasting a budget allocation of Rs 2.5 trillion, which represents an 18% jump, particularly following increased confrontations with India earlier this month.
Recently, India conducted a precision strike, dubbed “Operation Sindoor,” targeting terrorist infrastructure on May 7, following a deadly attack in Pahargam that resulted in the loss of 26 lives. This was met with attempts from Pakistan to strike Indian military bases over several days.
After four days of intense exchanges, a mutual understanding was reached on May 10 to de-escalate the conflict.
With the new requirements, the total conditions imposed on Pakistan by the IMF now amount to 50. Among the fresh stipulations, there’s a demand for Congressional ratification of the 2026 fiscal budget in alignment with the IMF staff agreement to meet program targets by June 2025.
The overall federal budget is set to be Rs 17.6 trillion, which includes Rs 1.07 trillion earmarked for development expenses.
Additionally, the IMF stipulated that states within Pakistan adopt new agricultural income tax laws, implementing strategies to enhance revenue management, taxpayer registration, and compliance, with a deadline set for June of this year.
Another requirement mandates the government to publicize its governance action plan based on the IMF’s diagnostic assessment of governance vulnerabilities, aiming for transparency in identifying necessary reforms.
The government is also tasked with developing and making public a strategy outlining the institutional and regulatory landscape from 2028 and the financial sector roadmap from 2027 onward.
In the energy sector, there are four new conditions. The government will need to announce an annual electricity tariff by July 1, maintaining costs at recovery levels. Additionally, notifications for gas tariff adjustments must be submitted by February 15, 2026.
The IMF also emphasizes the need for Congress to pass a law to make the prisoner of war power collection ordinance permanent by the end of this month, while the government pushes industries toward the national power grid.
Moreover, Congress is expected to eliminate the maximum Rs 3.21 per unit cap on surcharges for debt services aimed at consumers, highlighting an aspect where honest electricity users might bear the cost of inefficiencies in the sector.
The report identifies poor energy policies as a contributing factor to circular debt and inadequate governance, with a deadline set for the removal of the surcharge cap by the end of June.
Finally, the IMF has called for all necessary legislative measures to lift quantitative restrictions on importing used cars by the end of July, transitioning from allowing only vehicles under three years old to those under five years.
