IMF imposes 11 new conditions on Pakistan for bailout programme, flags rising tensions as risk: Report

The International Monetary Fund (IMF) has imposed 11 new conditions on Pakistan for the release of the next installment of its bailout programme according to a media report on Sunday. The IMF also warned that escalating tensions with India could pose significant risks to the scheme’s fiscal, external, and reform objectives.

Among the new requirements are the parliamentary approval of a Rs 17.6 trillion budget, an increase in the debt servicing surcharge on electricity bills, and the removal of restrictions on importing used cars older than three years.

According to The Express Tribune, the IMF's Staff Level report released on Saturday noted that "rising tensions between India and Pakistan, if sustained or worsened, could increase risks to the fiscal, external, and reform objectives of the programme."

The report highlighted that tensions between the two countries have escalated significantly over the past two weeks. However, market response has so far been relatively restrained, with the stock market holding on to most of its recent gains and only a moderate widening in bond spreads.

Additionally, the IMF report indicated that Pakistan's defence budget for the upcoming fiscal year is set at Rs 2.414 trillion—an increase of Rs 252 billion, or 12 per cent.

IMF Raises Total Conditions to 50 in Pakistan Bailout Programme

According to The Express Tribune, the IMF has added 11 new conditions to Pakistan’s bailout programme, bringing the total number of conditions to 50. One key condition mandates parliamentary approval of the fiscal year 2026 budget, aligned with IMF staff agreements, by the end of June 2025. The total size of the federal budget is projected at Rs 17.6 trillion, which includes Rs 1.07 trillion allocated for development spending.

Provinces and Governance Reforms Under Scrutiny

New conditions also extend to the provincial level. All four provinces are now required to implement new Agriculture Income Tax laws. This includes setting up a functioning system for tax return processing, taxpayer identification and registration, public outreach campaigns, and strategies to improve compliance. The deadline for this implementation is June 2025. Additionally, the government must publish a governance action plan based on the IMF’s Governance Diagnostic Assessment to identify and address major governance vulnerabilities.

Sectoral Reforms and Trade Liberalisation Measures Introduced

In the financial sector, the IMF requires Pakistan to draft and publish a long-term strategy outlining the institutional and regulatory framework for the post-2027 financial environment. In the energy sector, four conditions have been added, including the issuance of annual electricity tariff rebasing notifications by July 1 to maintain cost-recovery pricing.

Moreover, the government is expected to prepare a plan to eliminate all incentives related to Special Technology Zones and other industrial areas by 2035, with the plan due by the end of this year. On the trade front, the IMF has also demanded that legislation be submitted to Parliament by the end of July to lift all restrictions on importing used motor vehicles — initially applying to vehicles less than five years old. Currently, imports are only allowed for cars up to three years old.

(With PTI inputs)