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 implementation of the Governance and Corruption Diagnostic report and the National Fiscal Pact will top the agenda of the upcoming International Monetary Fund (IMF) review talks for the release of the next loan tranches worth $1.2 billion.
The global lender’s continued focus on areas that, until a few years ago, were dealt with by non-financial institutions underscores that it now attaches equal importance to areas considered the root causes of poor governance, tax evasion and the prevalence of corruption in Pakistan.
Progress on these plans will determine whether the IMF sends a technical assistance mission to Pakistan, which federal authorities have so far resisted.
Government sources told The Express Tribune that on the opening day of discussions with the federal government, the IMF has scheduled meetings on critical but politically sensitive issues, including governance, corruption, money laundering and tax evasion.
Led by its Mission Chief for Pakistan, Iva Petrova, the IMF team will first land in Karachi on February 25, where it will hold exclusive discussions with the State Bank of Pakistan, before proceeding to Islamabad. Talks with the federal and provincial governments are scheduled to begin on March 2 and are likely to conclude on March 11.
Following the kick-off meeting with Finance Minister Muhammad Aurangzeb, the IMF has scheduled a session on the overall implementation of the Economic Governance Reform plan, devised in light of the Governance and Corruption Diagnostic Assessment report, the sources said.
They added that, in line with IMF conditions, the government has already released a three-year implementation plan. Three separate committees, each headed by a federal minister, have begun meeting to oversee implementation of the agreed actions.
However, the federal and provincial governments have yet to implement the National Fiscal Pact, which aims to transfer provincial nature expenditures to the federating units, expand the tax base and share costs of higher education and the Benazir Income Support Programme (BISP) with the provinces.
Provincial governments have also delayed implementation of the new agriculture income tax regime, while the federal government has launched new health and education projects that fall within the provincial domain.
The sources said the IMF will also be briefed on progress in empowering provincial anti-corruption agencies to probe and prosecute anti-money laundering cases. Authority under the Anti-Money Laundering Act will be granted by the federal cabinet to investigate predicate offences leading to money laundering.
The IMF will seek an update on disclosure of wealth statements and income tax returns filed by provincial government employees. Bureaucracy has expressed concerns over disclosure of private information, the sources said.
The Fund has also sought progress on the centralised corruption risk assessment report, which is to be completed by June this year. The National Accountability Bureau (NAB) will draft the national corruption risk assessment, while a task force will be established under the Anti-Money Laundering and Counter Financing of Terrorism Authority.
The anti-graft body will finalise a centralised framework to assess corruption vulnerabilities across organisations, including non-financial risks such as procurement irregularities, project implementation corruption, misuse in state-owned enterprises, governance of macro-critical agencies, and systemic weaknesses including weak oversight, lack of transparency and politicised spending.
In its implementation plan report, the Ministry of Finance observed that the reforms are inherently complex, shaped not only by technical and administrative factors such as institutional capacity, legacy systems and human resources, but also by political economy dynamics affecting incentives, sequencing and feasibility.
To overcome these challenges, the government has engaged the United Kingdom’s Foreign, Commonwealth and Development Office as a substitute for the IMF’s insistence on sending a new comprehensive technical assistance mission to finalise and oversee implementation, the sources said.
Three committees have been constituted for effective implementation: the Economic Governance Systems Committee headed by Planning Minister Ahsan Iqbal, the Tax Administration Committee led by the finance minister, and the Anti-Corruption and Anti-Money Laundering Committee chaired by the law minister.
These committees provide strategic oversight, ensure coordination across institutions and guide sequencing of reforms. A dedicated technical unit housed in the Ministry of Finance supports implementation across all three committees.
The sources said Pakistan has committed to approving the draft Public Procurement Rules 2025 by June this year to end the special status that allows state-owned enterprises to secure government contracts without bidding. Mandatory third-party evaluation will apply to procurements above Rs2 billion, while procurements ranging from Rs500 million to Rs2 billion will require third-party validation.
This is intended to end the practice of awarding major infrastructure contracts to state-owned entities, which then subcontract the work to private firms while retaining profits without executing the projects.
Under another key condition, Pakistan has pledged to develop, by June this year, a methodology to address the backlog of court cases related to economic disputes. Based on diagnostic findings and reform options, the methodology will include qualitative and quantitative measures to monitor disposals, backlog, appeals, delays and timelines, alongside strategies for active case management. Backlog reduction targets and key performance indicators for the judiciary will also be set.
Pakistan has also committed to publishing a tax simplification strategy by May 2026 to reduce tax schedules, special regimes, excessive withholding and advance taxes, rationalise exemptions, scale back rule-making powers of the Federal Board of Revenue (FBR), and report annually on implementation progress.
By June this year, the government is required to complete recruitment of skilled staff to ensure the Tax Policy Office has the capacity to provide independent advice on tax policy, including analytical and legislative drafting functions.
Despite the establishment of the Tax Policy Office within the finance ministry, the FBR has retained tax policy functions, contrary to commitments made to the World Bank and the IMF.
