IMF Sets 11 New Conditions for Pakistan to Unlock $1.2 Billion Tranche

Pakistan has agreed to 11 new conditions set by the International Monetary Fund as it seeks approval for the next $1.2 billion tranche under its $7 billion Extended Fund Facility, including procurement reforms, tariff adjustments, and the phased withdrawal of tax incentives for special economic zones.

The new conditions were set ahead of the IMF Executive Board’s expected review next month of Pakistan’s third program assessment and the release of the fourth tranche. The measures also cover reforms tied to the first review under the Resilience and Sustainability Facility.

Among the key commitments, the government has agreed to amend public procurement rules by September 2026 to remove preferential treatment for state-owned enterprises in the award of contracts, a move that would curb the practice of granting billions of rupees worth of work without open competition.

The government has also committed to notifying semi-annual gas tariff adjustments from July 2026 and annual electricity tariff revisions from January 2027, signaling likely increases in both energy prices during fiscal year 2026-27.

In another structural benchmark, Pakistan agreed to amend the legal framework governing Special Economic Zones and Special Technology Zones to phase out fiscal incentives in line with the Finance Bill for 2026.

The plan includes shifting from profit-based incentives to cost-based support, ending associated rights and responsibilities, and abolishing all such incentives by 2035, including those granted under CPEC-related zones.

Pakistan further pledged to secure parliamentary approval for the 2026-27 budget in line with IMF staff understandings. An IMF mission is expected in Islamabad next month to finalize the fiscal framework for the upcoming budget with the finance ministry.

The reform package also extends to governance and tax administration. Pakistan has agreed to amend the National Accountability Bureau Ordinance by January 2027 to introduce qualification criteria and a merit-based, competitive selection process. To address tax collection shortfalls, the Federal Board of Revenue will issue regulations for selecting audit cases through a centralized mechanism.

The FBR has faced significant revenue pressures during the current fiscal year and is struggling to meet the revised annual collection target of Rs13.97 trillion by June 30, 2026.

On social spending, the government committed to increasing the Benazir Income Support Programme stipend to Rs19,500 from Rs14,500 starting January 2027, which will require a larger allocation in the next budget.

The State Bank of Pakistan also agreed to prepare a roadmap by the first quarter of 2027 for the gradual liberalization of the foreign exchange regime, a step that points to the easing of restrictions in the currency market.

In addition, the government will establish a Pakistan Regulatory Registry covering the federal government and Islamabad Capital Territory to streamline business regulations.