Demands anti-graft reforms, sugar sector liberalisation, remittance-cost overhaul
The government has agreed to the need for a mini-budget if revenues fall short of expectations by end-December 2025, according to the IMF. Photo: file
ISLAMABAD:
The International Monetary Fund (IMF) has slapped Pakistan with 11 more stringent conditions to address corruption vulnerabilities, end elite capture of the sugar sector and unearth the true cost of foreign remittances. The new conditions have also been imposed to reduce losses in the power sector through private sector participation, improve governance and service delivery, and enhance the effectiveness of the highly inefficient Federal Board of Revenue (FBR).
The IMF on Thursday released the staff-level report for the second review of the $7 billion bailout package, which disclosed that the lender has imposed 11 additional conditions on Pakistan. With the fresh additions, the total number of conditions has risen to 64 in the short span of one and a half years.
According to the report, Pakistan will publish on a government website the asset declarations of high-level federal civil servants by December next year. The purpose is to identify mismatches between income and assets. The report stated that the government also plans to expand this obligation to high-level provincial civil servants and allow banks full access to their declarations. By October next year, Pakistan will publish an action plan to mitigate corruption vulnerabilities in 10 identified departments based on institutional-level risk assessments. The National Accountability Bureau will lead and coordinate the development of action plans for agencies identified as facing the highest risks.
To strengthen provincial capacities to mitigate corruption risks, provincial anti-corruption establishments will be empowered to receive financial intelligence and continue receiving capacity-development support for financial investigations of corruption offences within their jurisdiction. The IMF’s new conditions followed the publication of the Governance and Corruption Diagnostic Assessment report, which exposed deep weaknesses in Pakistan’s legal and governance systems.
The IMF has also instructed Pakistan to complete a comprehensive assessment of remittance costs and structural impediments to cross-border payments, complemented by an action plan by May next year. The condition comes after remittance costs were projected to rise to $1.5 billion in the next couple of years. Remittances remain the single largest source of financing Pakistan’s contained imports.
By September next year, the government will conduct a comprehensive study of bottlenecks hindering local currency bond market development and publish a strategic action plan to address required improvements.
To break the elite capture of the sugar industry, the IMF has imposed a condition requiring the federal and provincial governments to agree and the federal cabinet to adopt a national policy for sugar market liberalisation by June next year. The policy must include recommendations on licensing, price controls, import and export permissions, zoning, and clear implementation timelines. The FBR’s poor performance has also triggered new conditions. The IMF has asked the government to finalise a roadmap by end-December to prioritise reforms; assess staffing requirements and roles; set timelines and milestones; estimate revenue impacts; and determine key performance indicators (KPIs) to monitor progress.
Based on this roadmap, the government must complete all actions necessary to fully implement at least three priority areas agreed with IMF staff, including any required subordinate legislation, staff hiring and allocation, and initial KPI reporting.
By December next year, the government must also develop and publish a comprehensive medium-term tax reform strategy, including a sequenced roadmap of tax policy, administration and legal reforms, clear governance arrangements, and a resource plan for implementation.
By the same deadline, the government will finalise preconditions for private-sector participation in HESCO and SEPCO and sign public service obligation (PSO) agreements with each of the seven largest entities before the next budget is submitted to Parliament.
The government will also prepare and submit to Parliament amendments to the Companies Act, 2017 to strengthen compliance for unlisted firms, modernise corporate governance structures and align regulations with international best practices. It will also publish a concept note outlining the scope, objectives and expected outcomes of proposed amendments to the SEZ Act, including the rationale for reform and KPIs.
The government has agreed to the need for a mini-budget if revenues fall short of expectations by end-December 2025, according to the IMF. The measures would include raising federal excise duty on fertilisers and pesticides by 5%, imposing excise duty on high-value sugary items and broadening the sales tax base by moving select items to the standard rate. The IMF has also extended the deadline to publish an action plan to address vulnerabilities highlighted in the Governance and Corruption Diagnostic report.
