The International Monetary Fund (IMF) has asked Pakistan to ensure the full implementation of all previously agreed economic conditions — not just at the federal level, but across all provincial budgets as well.
According to sources familiar with the matter, the IMF has made it clear that provincial governments will have to take steps to reduce expenses to align their fiscal plans with the broader national reform agenda under the Fund’s ongoing program.
The demand comes as part of the IMF’s push for stronger fiscal discipline, economic transparency, and growth-oriented governance.
Key demands from IMF
- No Energy Subsidies: Provincial governments will not be allowed to provide any form of subsidy on electricity and gas.
- Hiring Freeze: The IMF wants provinces to halt any new public sector hiring as part of efforts to control recurring expenses.
- Ease of Doing Business: All provincial administrations are expected to remove regulatory bottlenecks and simplify procedures to encourage private sector investment and entrepreneurship.
- Tax Collection: Provinces will also be required to enhance revenue collection from agricultural income and services, sectors historically under-taxed in the country.
- Digitalization of Accounts: Full digitalization of provincial financial systems has been mandated to improve transparency and efficiency.
- Unified Economic Vision: Provincial governments must fully support and not oppose the federal government’s economic targets. This includes helping to curb electricity and gas theft and cracking down on smuggling.
- Supporting economic growth for development projects will be a key principle.
Political consensus and budget approval
The IMF has also advised the provincial governments to take all parliamentary political parties into confidence regarding the reform agenda. Provincial assemblies must approve budgets that are in line with these conditions, the sources added.
Meanwhile, as preparations for the federal budget for the fiscal year 2025-26 near completion, Pakistan’s negotiations with the IMF have entered a crucial phase, with both sides working to finalize key targets and policy measures.
According to officials from the Ministry of Finance, the IMF has made several critical demands as part of its recommendations for the upcoming budget. These include a significant reduction in non-developmental expenditures, a ban on foreign travel and property or vehicle purchases by non-filers, and limiting subsidies exclusively to the poor.
While the IMF has agreed to a slight increase in government employees’ salaries, it has emphasized strict fiscal discipline. The global lender has also given its nod for a rise in the defence budget.
One of the most pressing points of discussion is the IMF’s proposed tax collection target of Rs14,300 billion, a figure the Pakistani side is hoping to bring down during ongoing talks. In addition, the IMF wants to eliminate sector-wide tax exemptions, including those in agriculture and industry. It is pressing for the implementation of a carbon levy and the inclusion of agricultural tax collection in the budget action plan.
