Tax Incentives Must End, Energy Tariffs Must Rise: IMF Pushes Stricter Reforms on Pakistan

The International Monetary Fund (IMF) has highlighted growing risks to Pakistan’s economic stability and mostly pointed to regional tensions and internal policy challenges as key concerns. The Fund in its latest report said it has tightened the conditions for releasing upcoming loan installments under its ongoing program with Pakistan. According to the IMF, rising tensions between Pakistan and India, if continued or escalated, pose a serious threat to economic stability. The report also noted that broader regional instability could negatively impact trade and investment in the region. While the risk of economic uncertainty has slightly eased, the IMF warned that instability could still derail Pakistan’s financial position, external accounts, and reform agenda. Concerns were also raised about the potential negative impact of additional US tariffs on Pakistan’s economy. The IMF reiterated that the current loan program is designed to ensure economic stability and promote sustainable development. Key policy actions demanded by the IMF include the gradual withdrawal of tax incentives currently enjoyed by special economic zones and the timely adjustment of electricity and gas tariffs to reflect actual costs. The release of climate-related funds will be contingent on the outcome of the second economic review. The IMF also expressed concern over flawed lending practices in the country.