Islamabad: Pakistan has agreed to a fresh set of conditions laid down by the International Monetary Fund as it seeks approval for the next $1.2 billion instalment under its ongoing $7 billion Extended Fund Facility.
The new commitments come ahead of the IMF Executive Board’s expected review next month, which will assess Pakistan’s progress and determine the release of the fourth tranche of funding.
According to details, the government has accepted 11 additional conditions covering key sectors such as public procurement, energy pricing, taxation, and governance reforms. These measures are also linked to the first review under the IMF’s Resilience and Sustainability Facility.
One of the major steps includes revising procurement rules by September 2026 to eliminate preferential treatment for state-owned enterprises. This move aims to promote transparency and competition in awarding public contracts, an area long criticised for inefficiencies.
In the energy sector, the government has committed to implementing regular tariff adjustments. Gas prices will be reviewed twice a year starting July 2026, while electricity tariffs are expected to be revised annually from January 2027. These changes are likely to result in higher energy costs for consumers during the next fiscal year.
The agreement also outlines significant changes to Special Economic Zones (SEZs) and Special Technology Zones. Pakistan plans to gradually phase out tax incentives associated with these zones, replacing them with cost-based support mechanisms. All such incentives, including those linked to CPEC projects, are set to be eliminated by 2035.
On the fiscal front, Islamabad has pledged to secure parliamentary approval for the 2026-27 budget in line with IMF understandings. An IMF mission is expected to visit Pakistan soon to finalise the budget framework with the finance ministry.
Governance reforms are also part of the package. The government has agreed to amend laws governing accountability institutions to introduce merit-based appointments. Additionally, the Federal Board of Revenue (FBR) will adopt a centralised system for selecting tax audit cases to improve transparency and efficiency.
Facing mounting revenue pressures, the FBR is currently struggling to meet its revised collection target of Rs13.97 trillion for the ongoing fiscal year.
On the social front, the government has committed to increasing payments under the Benazir Income Support Programme from Rs14,500 to Rs19,500 starting January 2027, requiring higher allocations in the upcoming budget.
Meanwhile, the State Bank of Pakistan will prepare a roadmap for gradually easing restrictions in the foreign exchange market, signalling potential liberalisation of the currency regime.
The reform package also includes plans to establish a Pakistan Regulatory Registry aimed at simplifying business regulations and improving the investment climate.
Experts believe that while these measures may help stabilise the economy and secure external financing, they could also bring short-term challenges, particularly in the form of higher energy prices and reduced fiscal incentives.
