By Staff Reporter
ISLAMABAD: The finance ministry pushed back against reports of tough new conditions tied to its bailout program with the International Monetary Fund, insisting that a slate of 11 fresh targets represents “continuity, sequencing, and deepening of Pakistan’s agreed reform agenda” rather than the “imposition of abrupt or unprecedented conditions.”
The clarification, issued Sunday in a statement, comes amid scrutiny over the government’s agreement to additional tax measures and expenditure cuts starting early next month. Those steps aim to offset revenue shortfalls and sustain the $7 billion Extended Fund Facility, according to IMF documents released earlier this week. The commitments, including new or revised structural benchmarks and two prior actions, paved the way for a staff-level agreement on the program’s second review. That deal culminated in IMF Executive Board approval on Dec. 9 for a disbursement of about $1.2 billion to the cash-strapped South Asian economy.
The ministry’s statement sought to “clarify the intent, context, and continuity of reform measures under Pakistan’s IMF Extended Fund Facility programme, particularly in response to recent commentary regarding so-called ‘new conditions.’” “The purpose is to reaffirm that the measures referenced are part of a phased, medium-term reform agenda agreed with the IMF, many of which are extensions or logical progressions of reforms already initiated by the Government of Pakistan,” the statement said.
It emphasised that the EFF supports countries in rolling out medium-term structural reforms to meet policy goals. “These reforms are implemented in a sequenced and step-by-step manner over the duration of the programme,” the ministry said. “Each review builds upon prior actions to ensure that the ultimate policy goals agreed at the outset of the program are achieved. Accordingly, actions under the EFF are structured as logical steps, with additional measures incorporated at each successive review.”
The latest Memorandum of Economic and Financial Policies, finalised after the second review, builds on the one from the first review and embodies this approach, the ministry added. It noted that during negotiations, the government pitched its own reform plans, and where the IMF deemed them supportive of program objectives, they were folded into the MEFP. “As a result, many of the structural benchmarks and actions included in the latest MEFP are derived from reforms already undertaken or initiated by the government of Pakistan, rather than being externally imposed or newly introduced conditions.”
The ministry provided point-by-point explanations for the 11 measures labeled as new conditions. On public disclosure of civil servants’ asset declarations, it said the reform dates back to the initial MEFP in May 2024. “The current structural benchmark represents the second step, following the successful legislative amendment to the Civil Servants Act, 1973.” Strengthening the National Accountability Bureau’s operational effectiveness and independence, including coordination with provincial anti-corruption bodies, stems from prior reviews. “The development of action plans for high-risk agencies is a continuation of this commitment and runs parallel to, rather than stemming from, the Governance and Corruption Diagnostic Assessment Report,” it added.
Empowering provincial anti-corruption establishments by granting access to financial intelligence aligns with the Anti-Money Laundering and Countering the Financing of Terrorism reform agenda, “integral to the EFF since its inception,” according to the ministry. Boosting remittance inflows is vital for external stability, the release said. “Following measures to curb informal channels, remittances increased by 26 per cent year-on-year from FY24 to FY25, with a further increase of 9.3 percent projected for FY26. The government, in coordination with the State Bank of Pakistan (SBP), has been working to remove structural bottlenecks in cross-border payments. The IMF has built upon these efforts by incorporating them into the MEFP.”
A comprehensive study on bottlenecks in the local currency bond market, aimed at expanding the investor base, was recommended in the IMF’s May 2025 staff report and has now become a structural benchmark. Deregulation of the sugar industry originated domestically, with a task force appointed by the prime minister and chaired by the power minister to recommend full liberalisation and a national policy in consultation with provinces. “Given its alignment with the EFF objective of reducing government intervention in commodity markets, the IMF has included this initiative as a structural benchmark,” the statement said.
The roadmap for the Federal Board of Revenue is tied to a broader domestic resource mobilisation push led by the prime minister. “Key actions already taken include approval of the transformation plan, establishment of the Tax Policy Office, and strengthening of compliance risk management. This structural benchmark builds upon commitments made with the IMF in May 2024 and March 2025,” the ministry said.
Developing and publishing a medium-term tax reform strategy is “a logical extension of earlier reforms, particularly the establishment and operationalisation of the Tax Policy Office to separate tax policy formulation from FBR’s operational functions,” it added. Privatization of distribution companies has been central to the EFF from the start, envisioned in phases. “Finalising preconditions for private-sector participation in Hesco (Hyderabad Electric Supply Company) and Sepco (Sukkur Electric Power Company) represents the next step following initiation of the process for the first batch of Discos. Additionally, the signing of Public Service Obligation (PSO) agreements with the seven largest entities reiterates an earlier programme commitment.”
Amendments to the Companies Act, 2017, to bolster compliance for unlisted firms are part of a wider regulatory overhaul to enhance the business environment, “an objective embedded in the EFF from the outset,” according to the release. The benchmark for a concept note on amendments to the Special Economic Zones Act follows the completion of an earlier SEZ assessment study. Contingency measures for revenue shortfalls have been embedded in the MEFP since May 2024, including an initial benchmark for a 5% federal excise duty on fertilizer and pesticides. “In conclusion, the measures outlined in the latest MEFP represent continuity, sequencing, and deepening of Pakistan’s agreed reform agenda under the IMF’s Extended Fund Facility, rather than the imposition of abrupt or unprecedented conditions,” the ministry said.
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