IMF seeks progress on NFC reforms

ISLAMABAD: The International Monetary Fund (IMF) on Tuesday sought progress on streamlining the National Finance Commission (NFC) process, a key sticking point in the resource-distribution mechanism between the Centre and provinces, official sources revealed to Business Recorder.

The Finance Ministry and the visiting IMF mission continued the technical discussions under the Extended Fund Facility (EFF) as part of the ongoing second review of the USD 7 billion programme and the first review of the Resilience and Sustainability Facility (RSF).

Sources revealed that the review sessions — held at a local hotel focused on a wide range of macroeconomic and fiscal issues, with special emphasis on the economic fallout of recent floods and their implications for growth and inflation.

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The Fund’s team questioned the progress on addressing anti-money laundering coordination, particularly prioritization of risks emerging from trade-based money laundering. Further a detailed review of risk-based supervision, analyzing trade-linked laundering channels and their broader impact on the country’s economic stability were deliberated upon.

One of the sessions focused on updates regarding the e-PADS procurement system, including coverage, statistics, external audit reviews, and exchanges of information with oversight bodies.

Another session focused on the beneficial ownership registry, alongside supervision of designated non-financial businesses and professions, aimed at strengthening Pakistan’s compliance with international standards.

Sources revealed that the Fund was appraised on the fiscal framework, including development spending in fiscal year 2025 and the outlook for fiscal year 2026. Officials discussed the government’s flood response strategy, delegation of spending authority, the use of structural cash surpluses, and measures to prevent shortfalls in health and education allocations. The meeting also touched upon the NFC process.

Later, the IMF team reviewed the macro framework, particularly real sector developments and the impact of the floods. The mission also examined the government’s progress on major surveys such as the Labour Force Survey (LFS), Household Integrated Economic Survey (HIES), and Pakistan Social and Living Standards Measurement (PSLM). The agenda for fiscal year 2026, national accounts, and inflation data were also scrutinized.

The Finance Ministry officials said the discussions are aimed at aligning Pakistan’s economic priorities with programme targets, while also factoring in flood-related disruptions to supply chains. The IMF mission is expected to continue engagements with relevant ministries and departments over the coming days before finalizing its review assessment.

A successful review would pave the way for the release of the next tranche — estimated at around USD1 billion — under the EFF programme, which is critical for shoring up Pakistan’s external financing and stabilizing macroeconomic conditions.

Copyright Business Recorder, 2025