IMF Sets Strict Conditions for Pakistan Sovereign Wealth Fund

The International Monetary Fund has asked Pakistan to introduce a set of strict conditions to make its Sovereign Wealth Fund fully operational, while requiring legal amendments through Parliament.

Under the proposed framework, the SWF will be restricted from borrowing, providing guarantees, or lending to public or private entities. It will also be barred from participating in public-private partnership projects and from acquiring financial assets or receiving funds from state-owned entities or financial institutions.

Officials said the amendments will be incorporated into law as a structural benchmark following the approval of the federal budget for fiscal year 2026-27, signaling the importance of the reform under the IMF program.

The government has already submitted amendments related to state-owned enterprises to Parliament to align them with the SOE Act, while work is ongoing to finalize laws for the remaining entities by August 2026.

Pakistan has assured the IMF that strict fiscal safeguards will be in place, including a mechanism under which all revenues generated by the SWF will go directly to the government instead of being retained by the fund.

Any investment by the SWF will be funded through allocations from the federal budget under the Public Finance Management Act 2019, limiting its financial independence and ensuring tighter oversight. The fund will effectively operate as a state-owned entity, with a mandate to attract foreign investment and support strategic commercial ventures while generating financial returns in line with its investment objectives.

At the same time, the government is continuing broader reforms of the state-owned sector, including reviews of major entities such as the National Highway Authority, Pakistan Railways, and Pakistan State Oil, while pushing ahead with privatization plans for multiple entities.

Officials said the new framework will require transparent and competitive processes for asset sales and investments, with strict disclosure standards, including details on beneficial ownership, to align with international best practices.