The International Monetary Fund (IMF) has cautioned Pakistan that escalating tensions with India could undermine the country’s $1 billion bailout program. The warning came as the IMF imposed 11 new conditions on Pakistan for the release of the next tranche of its bailout package, bringing the total number of conditions to 50.
Implications of Rising Tensions
The IMF expressed concerns that heightened tensions between India and Pakistan could pose risks to the bailout program’s fiscal, external, and reform goals. The fund noted that any perceived misuse of fund disbursements or lack of even-handedness could lead to reputational risks
Key Conditions Imposed by IMF
- Parliamentary Approval of Budget:
- Pakistan must secure parliamentary approval for a PKR 17.6 trillion budget, aligning with IMF program targets by June 2025.
- Agricultural Income Tax Reform:
- All four provinces are required to implement new agricultural income tax laws, including taxpayer registration, return processing, and compliance measures by June 2025.
- Governance Action Plan:
- The government must publish a governance reform strategy based on the IMF’s Governance Diagnostic Assessment.
- Energy Sector Reforms:
- Pakistan must rebase electricity tariffs by July 1, 2025, and introduce semi-annual gas tariff adjustments by February 15, 2026.
- Used Car Import Liberalization:
- Pakistan needs to submit legislation to Parliament by July 2025 to lift quantitative restrictions on importing used cars less than five years old.
Background
The IMF approved the immediate disbursement of approximately $1 billion to Pakistan under the Extended Fund Facility (EFF) on May 9, 2025. The EFF aims to build resilience and enable sustainable growth in Pakistan, with priorities including entrenching macroeconomic sustainability
