International Monetary Fund (IMF) to Pakistan .. Updates

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IMF shares MEFP draft with Pakistan to finalise $7b EFF deal​

According to sources, some relief measures are being considered for the construction and real estate sectors.

Irshad Ansari
March 18, 2025

The IMF has provided Pakistani authorities with the draft of the Memorandum of Economic and Financial Policies (MEFP) to help build consensus.

This move could pave the way for reaching a staff-level agreement under the $7 billion Extended Fund Facility (EFF).

According to sources, some relief measures are being considered for the construction and real estate sectors. However, it is yet to be decided whether these relief measures will be implemented immediately or included in the upcoming budget.

It is worth noting that negotiations between Pakistan and the IMF concluded without a final agreement, and a staff-level agreement remains essential before the release of a $1 billion tranche.

Meanwhile, the IMF has imposed strict conditions for financial discipline, Express News reported.

Sources indicate that the Federal Board of Revenue (FBR) fell short of its tax collection target, prompting expenditure cuts and additional measures to achieve a primary surplus. The IMF has also proposed reducing electricity prices and maintaining the petroleum levy at Rs 70 per litre.

Furthermore, the IMF has inquired how the government plans to address circular debt, as previous cross-subsidy models have failed in the past. In response, the government has presented a six-year plan to eliminate circular debt in the energy sector.

According to sources, if the IMF approves the draft, the Pakistani government is expected to receive financial relief.

Earlier, the IMF mission returned to Washington without reaching a staff-level agreement with Pakistan for the release of over $1 billion loan tranche but it said that "significant progress" was made during the talks towards striking a deal.

A day after the end of the first review talks, the IMF issued a press statement that acknowledged "strong implementation" on the programme. But it remained short of announcing the Staff Level Agreement, which is critical to maintaining economic stability in Pakistan.

 

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IMF approves tax cut on property purchases in Pakistan​

In a virtual meeting, Pakistan and IMF agreed to lower the federal excise duty rate for property buyers.

Irshad Ansari
March 22, 2025

The International Monetary Fund (IMF) has agreed in principle to a partial reduction in the withholding tax rate on property purchases, following a request from the Federal Board of Revenue (FBR).

The new rate, which will be reduced by two percent, is set to come into effect in April 2025. However, the withholding tax rate imposed on property sellers will remain unchanged.

According to sources, a recent virtual meeting between Pakistani officials and the IMF concluded with an agreement to lower the federal excise duty rate for property buyers. However, the tax on property sellers will still be collected at the existing rate.

In addition, the IMF has also agreed to a reduction of Rs60 billion in the tax revenue target for March 2025, as requested by the FBR.

The sources indicated that this development would pave the way for consensus on the Memorandum of Economic and Financial Policies (MEFP) and a staff-level agreement, which is expected to be finalized next week.

Regarding the tax reduction on property transactions, FBR had previously requested the IMF to lower withholding tax rates for both buyers and sellers under Sections 236C and 236. However, the IMF has only agreed to reduce the tax rate for buyers under Section 236 by two percent.

Additionally, the IMF has permitted the government to raise PKR 1,257 billion from banks to address the circular debt issue in the electricity sector.

 

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IMF turns down Islamabad's request to reduce property taxes​

Rejection comes as Islamabad struggles to meet the conditions for securing a staff-level agreement

Irshad Ansari
March 24, 2025

The International Monetary Fund (IMF) has turned down Pakistan’s request to reduce taxes on property transactions, sources familiar with the negotiations said on Monday.

The rejection comes as Islamabad struggles to meet the conditions for securing a staff-level agreement, which would pave the way for further financial assistance.

According to sources, the IMF also refused to lower withholding tax by 2% and rejected Pakistan’s request for tax relief on tobacco and beverages.

Additionally, there was no agreement on relaxing Pakistan’s revenue targets for March 2025, making it harder for the government to meet its fiscal commitments under the IMF programme.

Pakistan will be required to provide additional guarantees to finalise the staff-level agreement, sources said. The IMF has also set a condition preventing provinces from intervening in wheat procurement.

Meanwhile, the global lender has shown willingness to incorporate climate finance into the programme. Under the Resilience and Sustainability Facility, Pakistan will be offered financial assistance for climate-related initiatives.

With key tax relief requests denied, Pakistan faces further pressure to implement tough fiscal measures. The government must now provide additional assurances to unlock the next tranche of IMF funding.

 

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IMF allows Pakistan to cut power tariff​

The development comes days after Pakistan and the IMF reached a staff-level agreement

Irshad Ansari
March 27, 2025

The International Monetary Fund (IMF) has allowed the Pakistan government to reduce electricity tariffs by Rs1 per kilowatt-hour for all consumers.

The relief will be financed through revenue collected via a levy imposed on captive power plants using natural gas, the IMF said in a statement.

The move is part of a broader relief package the government is working on for electricity users.

According to official sources, the reduction could lessen the financial burden on consumers by up to Rs100 billion. A household consuming 500 units of electricity would see a monthly saving of Rs500 under the new plan.

The relief will be funded through revenue generated from a levy imposed on gas consumed by captive power plants. The IMF stated that the decision is part of ongoing reforms in the energy sector.

The development comes days after Pakistan and the IMF reached a staff-level agreement, unlocking access to an additional $1 billion under the Extended Fund Facility (EFF).

According to the IMF, inflation in Pakistan has reached its lowest point since 2015, and the country’s economic indicators show signs of further improvement.

The IMF's executive board will approve the EFF's second tranche of $1 billion and the $1.3 billion RSF new facility either by the end of April or early May, according to Pakistani authorities.

However, the fund will release only $1 billion while the $1.3 billion will be given over a period of 28 months and subject to implementing about 13 conditions, including carbon levy.

 

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International Monetary Fund (IMF) Director of Communications Julie Kozack said on Friday that Pakistan will receive $1.3 billion in climate financing.

Speaking at a press conference, Kozack highlighted that discussions with Pakistan covered both the Extended Fund Facility (EFF) and climate financing, Express News reported.

Kozack further mentioned that Pakistan’s 37-month EFF program, approved in September of the previous year, remains in place.

Earlier on Wednesday, Prime Minister Shehbaz Sharif confirmed the new $1.3 billion deal with the IMF during a Cabinet meeting in Islamabad.

Subject to approval by the IMF board, Pakistan will receive $1.3 billion under a new climate resilience loan program, which will span 28 months.

Additionally, a staff-level agreement will release $1 billion for Pakistan under the $7 billion bailout program that was agreed upon last year.

Nathan Porter, IMF mission chief to Pakistan, stated in a press release that the staff-level agreement covers both the first review of the 37-month Extended Fund Facility (EFF) and the new 28-month arrangement under the IMF’s Resilience and Sustainability Trust. The total access to funds under the new arrangement amounts to around $1.3 billion over the next 28 months.

Porter also noted that Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite challenging global conditions over the past 18 months.

Once approved by the IMF board, Pakistan will have access to about $1 billion under the EFF, bringing the total disbursements under the program to approximately $2 billion.

 

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IMF mission arrives in Pakistan for governance review​

IMF team will review budget proposals for the fiscal year 2025-26

News Desk'
April 04, 2025

A delegation from the International Monetary Fund (IMF) has arrived in Pakistan to conduct a comprehensive review of governance and corruption issues.

According to sources, the IMF team will begin meetings with Pakistani officials on Monday.

The mission’s primary objective is to provide technical assistance to enhance Pakistan’s reform capacity. The discussions will focus on strengthening governance and addressing corruption issues, with the aim of supporting Pakistan's reform efforts.

Sources say that the IMF team will review budget proposals for the fiscal year 2025-26 and engage in follow-up negotiations regarding technical support for governance issues.

The delegation will also discuss measures to improve tax revenue, control government expenditure, and finalize proposals for the upcoming budget with Ministry of Finance officials.

The federal budget for the fiscal year 2025-26 is expected to be presented in the National Assembly during the first week of June.

The International Monetary Fund (IMF) recently commended the Pakistani government for its fiscal policy efforts, particularly in reducing public debt, controlling inflation, enhancing tax equity, and maintaining price stability. This recognition was issued on March 26.

In addition, last month, the IMF reached a deal with Pakistan for a new $1.3 billion arrangement and agreed on the first review of the ongoing 37-month bailout program, according to the IMF’s statement.

 

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Finance Minister Muhammad Aurangzeb has confirmed that a staff-level agreement had been reached, and Pakistan had achieved the IMF’s structural benchmarks.

He noted that this is the first time Pakistan has met these benchmarks, which included steps for national fiscal agreements and agricultural income tax collection.

The Finance Minister also mentioned that for the first time, provinces had taken steps to meet targets, and he expressed hope that the IMF’s Executive Board would soon approve the second tranche of one billion dollars.

On climate change, he stated that an agreement had been reached with the IMF, and the funds will be disbursed in phases as Pakistan meets its climate change goals.

He emphasized that for the final IMF programme, full implementation of structural reforms is essential. Economic stability has already been achieved, but now the focus is on sustaining and advancing it.

Muhammad Aurangzeb shared that the tax-to-GDP ratio had been increased to 10.8% and tax collection was being enhanced.

He pointed out the benefits of the digitalization of the Federal Board of Revenue (FBR), and mentioned that the Track and Trace system had been fully implemented for sugar, fertilisers, and tobacco. However, its implementation in cement is still pending.

The Finance Minister concluded by announcing that a system will be introduced in the next fiscal year allowing salaried individuals to directly pay their income taxes, making the process easier.

Meanwhile the IMF has sent a second Corruption and Governance Diagnostic Mission to Pakistan a few months apart to hold in-depth engagements with over 30 departments and institutions, including the registrars of the Supreme Court of Pakistan (SCP) and the accountability court.

The mission, which began its interactions on Thursday, will stay in the country until April 14, according to Pakistani authorities.

The IMF's response on launching the second corruption and governance diagnostic mission since February was awaited until the filing of this story.

 

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IMF programme wasn’t possible without China’s support: PM Shehbaz​

APP
April 16, 2025


Prime Minister Shehbaz Sharif on Wednesday highlighted bilateral engagement with China, saying that the recent programme with International Monetary Fund (IMF) “was not possible” without Beijing’s support.

Pakistan has held strong bilateral relations with China which has supported it through many investments and development projects such as the China-Pakistan Economic Corridor (CPEC), which was termed as a “lifeline” for the country’s economy.

Last month, China extended the repayment period of a $2 billion loan to Pakistan by one year, offering much-needed financial relief and helping stabilise the country’s foreign exchange reserves.

The government is working to strengthen its finances after securing a $7 billion IMF bailout in September 2024. Pakistan reached a staff-level agreement (SLA) with the global money lender in March after a successful review of first installment of the loan.

PM Shehbaz called China as the country’s “most sincere friend” at a ceremony in Islamabad regarding the government’s initiative for the capacity building of 1,000 graduates in the field of agriculture by sending them to China.

He reaffirmed the government’s commitment to transforming Pakistan’s agricultural sector, calling it essential for achieving sustainable economic growth.

He said that that strengthening the agricultural backbone of the country would help ensure food security, boost exports, and improve livelihoods for millions of farmers.

The premier highlighted the urgent need to revive and modernise the country’s agricultural research institutions.

“We must focus on meaningful farming practices, digitalised crop management, and the development of climate-resilient seeds,” he said.

Under the government’s initiative, 300 selected graduates the field of agriculture were being sent to China for a three-month training programme during the first phase. In the second phase, 400 graduates will undergo a six-month training programme, followed by the remaining 300 graduates who will participate in a three-month training programme in the final phase.

The prime minister congratulated the 300 young graduates, who will fly to China for training in agriculture techniques and equip themselves with knowledge. He hoped that upon their return back to Pakistan, they will contribute towards agricultural economy.

Speaking about his visit to China, PM Shehbaz said that he was inspired by the research work in various fields of agriculture sector at the Chinese universities. He said, “I decided then to send 1,000 young Pakistani agriculture graduates to benefit from this great experience.”

Chinese Ambassador Jiang Zaidong said that he was much inspired by the government’s performance during one year where the country’s macroeconomic indicators had improved significantly.

He said the Chinese government stood ready to cooperate with Pakistan in promoting bilateral relations especially in the agricultural sector.

He emphasised that China’s President Xi Jinping always attached great importance to their relationship with the neighbouring countries.

Under CPEC, China had made a direct investment of around US$35.4 billion, reflecting the strong relationship between the two countries, he added.

 

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IMF slaps 11 new conditions on Pakistan​

Foreign lender releases Staff Level report

Shahbaz Rana
May 18, 2025

The International Monetary Fund (IMF) has slapped 11 new conditions on Pakistan, including approval of a new Rs17.6 trillion worth budget, increasing debt servicing surcharge on electricity bills and lifting restrictions on the import of more than three years old used cars.

The Staff Level report, which the IMF released on Saturday, also said that "rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten risks to the fiscal, external and reform goals of the programme".

The report further stated that tensions between Pakistan and India have risen significantly over the past two weeks but so far the market reaction has been modest with the stock market retaining most of its recent gains and spreads widening moderately.

The IMF has shown the defense budget for the next fiscal year at Rs2.414 trillion, which is higher by Rs252 billion or 12%. Compared to the IMF's projection, the government has indicated allocating over Rs2.5 trillion or 18% higher budget after India's naked aggression.

The report revealed that the IMF has slapped 11 more conditions on Pakistan for the sake of just $7 billion lending, taking the total conditions to 50.

It has imposed a new condition of securing "parliamentary approval of the fiscal year 2026 budget in line with the IMF staff agreement to meet programme targets by end-June 2025".

The IMF has shown the total size of the federal budget at Rs17.6 trillion, including Rs1.07 trillion for the development spending. The Express Tribune had reported a few days ago that the government would present over Rs17.5 trillion budget.

The IMF has shown interest spending at Rs8.7 trillion, the primary budget surplus at Rs2.1 trillion and the overall deficit at Rs6.6 trillion.

A new condition has also been imposed on the provinces where the four federating units will implement the new Agriculture Income Tax laws through a comprehensive plan, including the establishment of an operational platform for processing returns, taxpayer identification and registration, a communication campaign, and a compliance improvement plan. The deadline for the provinces is June this year.

According to the third new condition, the government will publish a governance action plan based on the recommendations of the Governance Diagnostic Assessment by the IMF. The purpose of the report is to publicly identify reform measures to address critical governance vulnerabilities.

The fourth new condition states that the government will give annual inflation adjustment of the unconditional cash transfer programme to maintain people real purchasing power

Another new condition states that the government will prepare and publish a plan outlining the government's post-2027 financial sector strategy, outlining the institutional and regulatory environment from 2028 onwards.

In the energy sector, four new conditions have been introduced. The government will issue notifications of the annual electricity tariff rebasing by July 1st of this year to maintain energy tariffs at cost recovery levels.

It will also issue notification of the semi-annual gas tariff adjustment to maintain energy tariffs at cost recovery levels by February 15, 2026, according to the report.

Parliament will also adopt legislation to make captive power levy ordinance permanent by the end of this month, according to the IMF. The government has increased the cost for the industries to force them to shift to the national electricity grid.

Parliament will also adopt legislation to remove the maximum Rs3.21 per unit cap on the debt service surcharge, which is tantamount to punishing honest electricity consumers to pay for the inefficiency of the power sector. The IMF and the World Bank dictated that wrong energy policies are causing the accumulation of the circular debt in addition to the government's bad governance. The deadline to remove the cap is the end of June, according to the report.

The IMF has also imposed a condition that Pakistan will prepare a plan based on the assessment conducted to fully phase out all incentives in relation to Special Technology Zones and other industrial parks and zones by 2035. The report has to be prepared by the end of this year.

In a consumer-friendly condition, the IMF has asked Pakistan to submit to the Parliament all required legislation for lifting all quantitative restrictions on the commercial importation of used motor vehicles (initially only for vehicles less than five years old by end of July.

Currently only up to three years old cars can be imported and there are many non-tariff barriers to discourage the import. The purpose of lifting these restrictions is liberalizing trade and increasing vehicle affordability, said the IMF.

In addition to imposing new conditions, the IMF has also made adjustments in the earlier conditions.

Programme Implementation

The IMF has extended the deadlines of four conditions whose implementation had been delayed. The lender said that the government met all seven quantitative performance criteria for end-December 2024. These were floors on net international reserves of the SBP; targeted cash transfer spending; the number of new tax returns from new filers, the ceilings on net domestic assets of the SBP; the SBP's FX swaps; the general government primary budget deficit; and government guarantees.

The majority of indicative targets were met at end-December, including the ceilings on the aggregate provincial primary budget deficit; net accumulation of tax refund arrears; and power sector payment arrears; the floors on revenues collected by provincial revenue authorities; and the weighted average maturity of local currency debt securities. However, the conditions on the government health and education spending; net tax revenues collected by the FBR; and net tax revenues collected from retailers under the Tajir Dost scheme were missed, said the IMF.

The respective governments also met nine structural benchmarks including on approval of a National Fiscal Pact, improving safeguards for monetary policy operations and approval of amendments to bank resolution and deposit legislation.

But the structural benchmark on provincial Agricultural Income Tax legislation was not met at the end-October, but this legislation was subsequently passed in February 2025. Another two structural benchmarks were missed due to delays in passing amendments to the Civil Servants and Sovereign Wealth Fund (SWF) Acts.

Two SBs relating to resolving undercapitalized banks and to captive power producers were missed, but subsequent policy actions are expected to accomplish the underlying objectives, said the IMF.