IMF tightens bailout terms for Pakistan with 11 new conditions amid regional tensions

The International Monetary Fund (IMF) has introduced 11 additional requirements for Pakistan to fulfill before it can receive the next installment of its financial aid package. The IMF has also expressed concerns that escalating tensions between India and Pakistan could jeopardize the programme’s objectives related to fiscal discipline, foreign exchange stability, and structural reforms.

Also Read:Javed Akhtar declares: ‘I’d rather go to hell than Pakistan’ amid rising Indo-Pak tensions

Among the new stipulations is the approval of a Rs 17.6 trillion federal budget by Parliament, which includes increased development spending and a higher defense allocation, especially following recent military exchanges with India. The defence budget alone has risen by 12%, while the government's own estimate pushes it even higher, potentially due to the flare-up in cross-border military actions earlier in May.

Key changes have also been introduced in energy policy. These include raising electricity tariffs to match production costs, implementing bi-annual gas price adjustments, removing a fixed cap on the electricity debt servicing surcharge, and making certain power levies permanent measures aimed at addressing inefficiencies in the energy sector and reducing circular debt.

In addition, the IMF has directed the provinces to implement new agricultural income tax laws, complete with systems for registration and enforcement. The federal government must also present a governance reform blueprint and draft a financial sector strategy for the period after 2027.

To improve transparency and accountability, Pakistan must eliminate specific financial incentives for special economic zones by 2035 and publish a phase-out plan by year-end. A more consumer-centric requirement includes easing import rules for used cars, allowing vehicles up to five years old to be brought in an expansion from the current three-year limit.