EDITORIAL: A detailed clarification issued by the Ministry of Finance (MoF) on International Monetary Fund’s (IMF’s) new conditions maintains that they are a reaffirmation of measures agreed by the government under a phased medium-term reform agenda. The note further emphasised that the “reforms are implemented in a sequenced and step by step manner over the duration of the programme” (scheduled for end late 2027).
The Fund’s documents uploaded on its website late last week acknowledges this, adding that “test dates for two Structural Benchmarks (SBs) that have been missed due to implementation delays are proposed to be reset. New SBs are proposed to support progress on Federal Board of Revenue and tax policy reform, governance and anti-corruption, capital market development, power sector efficiency, State-Owned Entities (SOEs) governance framework implementation, commodity market liberalisation, and improvements to the regulatory and investment environment.”
The drive towards greater transparency by multilaterals began with full disclosure of the conditions agreed with the authorities (and uploaded on its website) as well as the staff assessment of the implementation status of these conditions at each quarterly review undertaken as a prerequisite for Board approval of a subsequent tranche release. The frequent use of the word “should” in the December 2025 documents relating to staff appraisal on implementation progress of agreed conditions during staff discussions on the second review under the ongoing Extended Fund Facility and the first review of the Sustainability and Resilience Facility indicates the Fund’s concerns of identified “substantial risks” to the programmes as follows: “uncertainty as to the full impact of recent monsoon floods could weigh more severely on activity and inflation or generate larger fiscal and external pressures. Global risks remain elevated, including from escalation of geopolitical tensions, tightening of global financial conditions, new trade measures in key partner countries, or weakening remittance or international aid inflows. Domestic pressures to ease policies and delay reforms persist, which would risk undermining the progress achieved under the programme.”
These risks when taken in conjunction with the staff appraisal, urging “stronger effort to advance structural reforms…boosting social protection and human capital programmes…urgent need to build resilience to climate shocks” must be viewed from the perspective of the business community as well as the general public.
Time-bound specific sectoral reforms contained in the Memoranda of Economic and Financial Policies (MEFP) note the following that would raise the risk element of the programme, thereby placing a heavy political burden on an administration that has long passed its honeymoon period: (i) shortfall in the under performance of the Captive Power Plants of 104 billion rupees, which would have to be covered by a reduction in power subsidies made possible through lower circular debt accumulation (or flow instead of the stock that the government intends to retire by borrowing 1.25 trillion rupees from 18 commercial banks whose interest payments and principal will be paid by the consumers); (ii) if revenues “continue to fall short of expectations” FBR (Federal Board of Revenue) in consultation with the Fund has pledged to increase federal excise duty on fertilizers and pesticides by 5 percent (which would raise the input costs of food items), introduce FED on sugary drinks and move items from the eighth GST schedule to general GST regime: (iii) agriculture income tax (AIT) has been legislated and implemented but the collections from this are meagre, which led to the pledge to timely exchange of data including AIT reported in income tax declarations submitted to the FBR; (iv) improving the risk monitoring framework of public private partnerships, including those at the provincial level; (v) the insistence on a single treasury account subsequent to a sectorisation study that would clearly define the institutions that are part of the federal government; (vi) unconditional cash transfers under Benazir Income Support Programme (BISP) to increase from 13,500 to 14,500 rupees per quarter next month and scaling up health and education spending under BISP at federal and provincial levels; (vii) to mobilise remittances sustainably without fiscal support by removing the costly payment system impediments; (viii) coverage of all SOEs under SOE governance framework by end August 2026 (instead of June 2025), as well as completion of PIA privatisation by end this month; (ix) action plan with respect to Corruption and Governance Diagnostic by the end of this month, including an action plan of measures to mitigate corruption vulnerabilities in the top 10 departments of the government identified with highest corruption risks (end October 2026), strengthening the right to information by departments, judicial reforms and publishing the total inflows as well as incentives meted out by the Special Facilitation Investment Council (SIFC) to attract foreign investors.
To conclude, the timelines and the nature of the reforms entail a very serious challenge to the existing elite capture of resources as well as expenditure priorities and would require a commitment that has so far not been displayed in the budget or reflected in the fiscal operations of the federal and provincial governments in the first quarter of the current year released by the Finance Division.
Copyright Business Recorder, 2025
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