The International Monetary Fund (IMF) has imposed 11 additional conditions on Pakistan as part of its $7 billion bailout package, raising the total to 50 stipulations, while highlighting escalating tensions with India as a significant threat to the country’s economic stability, according to a report by Pakistani newspaper Express Tribune.
The IMF’s latest Staff Level report, released on Saturday, outlines stringent requirements, including the approval of a Rs 17.6 trillion federal budget, hiking electricity debt servicing surcharges, and easing import bans on used cars older than three years. The report warns that “rising tensions between India and Pakistan, if sustained or worsen, could jeopardize the fiscal, external, and reform objectives of the programme.”
Despite recent market stability, with Pakistan’s stock market holding onto gains and bond spreads only slightly widening, the IMF remains cautious about the geopolitical strain. The report notes a sharp rise in tensions over the past two weeks, which could destabilize Pakistan’s fragile economic recovery.
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The IMF has projected Pakistan’s defense budget for the next fiscal year at Rs 2.414 trillion, a 12% increase of Rs 252 billion. However, the government plans to allocate over Rs 2.5 trillion, reflecting an 18% hike, likely driven by the ongoing conflict with India.
Among the new conditions, the IMF mandates parliamentary approval of the 2026 fiscal budget by June 2025 to align with programme targets. The federal budget is set at Rs 17.6 trillion, with Rs 1.07 trillion for development spending and a deficit of Rs 6.6 trillion.
Provinces face new obligations, including implementing Agriculture Income Tax laws by June 2025 through a robust plan for taxpayer registration, return processing, and compliance. Additionally, the government must publish a governance action plan based on the IMF’s Governance Diagnostic Assessment to address systemic vulnerabilities.
To protect citizens’ purchasing power, the IMF requires annual inflation adjustments to the unconditional cash transfer programme. The government must also outline a post-2027 financial sector strategy, detailing the regulatory framework from 2028 onward.
In the energy sector, four conditions focus on cost recovery. By July 1, 2025, the government must notify annual electricity tariff rebasing, followed by a semi-annual gas tariff adjustment by February 15, 2026. Parliament is also tasked with making the captive power levy ordinance permanent by May 2025 to push industries onto the national grid. Lastly, electricity debt servicing surcharges will rise to manage mounting energy sector liabilities.
With these measures, the IMF aims to stabilize Pakistan’s economy, but the shadow of geopolitical risks and a hefty list of conditions underscore the challenges ahead for the cash-strapped nation.
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