The International Monetary Fund (IMF) has imposed 11 new conditions on Pakistan for the release of the next tranche of its bailout programme, raising concerns over the country’s fiscal and reform goals. The IMF has also warned that escalating tensions with India could pose significant risks to Pakistan’s economic stability.
According to reports, the newly introduced conditions include securing parliamentary approval for a Rs 17.6 trillion federal budget, increasing the debt servicing surcharge on electricity bills, and lifting restrictions on the import of used cars older than three years. Additionally, the IMF has mandated the implementation of new Agricultural Income Tax laws across provinces, requiring a comprehensive plan for taxpayer identification and compliance.
The IMF’s Staff Level report, released on May 17, highlighted concerns over Pakistan’s rising defence expenditure, which is projected at Rs 2.414 trillion for the next fiscal year—a 12% increase from the previous year. However, following recent military tensions with India, the Pakistani government has signaled a defence allocation exceeding Rs 2.5 trillion, marking an 18% increase over the IMF’s estimate.
The report also noted that despite heightened tensions between India and Pakistan, financial markets have remained relatively stable, with Pakistan’s stock market holding recent gains and bond spreads widening only slightly. The IMF cautioned that if tensions persist or worsen, they could negatively impact Pakistan’s fiscal and external stability.
Among the newly imposed conditions, the IMF has required Pakistan to publish a governance action plan based on recommendations from the Governance Diagnostic Assessment. Additionally, the government must prepare a post-2027 financial sector strategy, outlining institutional and regulatory frameworks for the future.
The IMF’s latest conditions bring the total number of programme requirements to 50, further tightening the financial oversight on Pakistan’s economic policies. The government is expected to meet these conditions before the next review of the Extended Fund Facility in September 2025.
As Pakistan navigates these stringent economic measures, policymakers face the challenge of balancing fiscal reforms while addressing geopolitical uncertainties. The coming months will be crucial in determining the country’s ability to meet IMF targets and sustain economic stability.
