Pakistan Needs to Fulfill 11 More IMF Conditions or No More Funds

The International Monetary Fund has imposed 11 new conditions on Pakistan for the release of remaining funds under the ongoing $7 billion loan program. According to the IMF staff report released Saturday, these include approval of a Rs. 17.6 trillion federal budget, removal of power tariff caps, enforcement of agriculture income tax, and lifting curbs on used car imports. Pakistan must secure parliamentary approval for the FY2026 budget, with a total outlay of Rs. 17.6 trillion, including Rs. 8.7 trillion in interest payments, a Rs. 2.1 trillion primary surplus, and a Rs. 6.6 trillion overall deficit. Development spending is projected at Rs. 1.07 trillion. The IMF listed Pakistan’s defence budget at Rs. 2.414 trillion for the next year, an increase of Rs. 252 billion or 12 percent. However, the government has indicated a higher allocation of over Rs. 2.5 trillion due to India’s recent military aggression. The report also warned that if India-Pakistan tensions persist or escalate, they could threaten Pakistan’s fiscal, external, and reform targets. In energy, the IMF has demanded annual electricity tariff rebasing by July 1 and semi-annual gas tariff adjustments by February 15, 2026, to ensure full cost recovery. Parliament must also legislate by June to remove the Rs. 3.21 per unit cap on the debt servicing surcharge and adopt a permanent law for the captive power levy by May. A new condition requires all provinces to implement agriculture income tax through. The deadline is June. The government must also publish a governance reform plan based on IMF assessments, index cash transfer benefits to inflation annually, and prepare a post-2027 financial sector strategy detailing institutional and regulatory reforms from 2028 onward. The IMF has also directed Pakistan to submit legislation by July to remove all quantitative restrictions on commercial import of used vehicles, initially up to five years old. The IMF says easing these rules will support trade liberalization and improve car affordability. Another condition requires Pakistan to prepare a phase-out plan by year-end to eliminate all tax incentives for Special Technology Zones and industrial parks by 2035.