Finance Ministry Clarifies ‘New conditions’ with IMF are Part of Ongoing Reform Agenda
The finance ministry on Sunday clarified that the 11 targets recently agreed with the International Monetary Fund (IMF) represent a continuation, sequencing, and deepening of PakistanS existing reform agenda, rather than the imposition of new or abrupt conditions. This clarification comes following reports of the government agreeing to additional tax measures and expenditure cuts from early next month to address revenue shortfalls and keep the $7 billion Extended Fund Facility (EFF) on track.
The IMF revealed these commitments in documents released earlier this week, stating that adherence to the new or revised structural benchmarks, alongside the completion of two “prior actions,” led to a staff-level agreement on the second EFF review and its subsequent approval by the IMF Executive Board on December 9, unlocking approximately $1.2 billion for Pakistan.
In a press release, the finance ministry emphasized the intent, context, and continuity of the reform measures under the IMF EFF program. It affirmed that the referenced measures are part of a phased, medium-term reform agenda agreed upon with the IMF, often extending or logically progressing reforms already initiated by the government.
The EFF is designed to support countries in implementing medium-term structural reforms to achieve agreed policy objectives, implemented sequentially over the programme’s duration. Each review builds upon previous actions to ensure the achievement of the initial policy goals. Consequently, actions under the EFF are structured as logical steps, incorporating additional measures at each successive review.
The Memorandum of Economic and Financial Policies (MEFP) finalised after the second EFF review supplements the initial MEFP and reflects this phased approach. The government presented its planned policy reform initiatives during IMF discussions, which were incorporated into the MEFP if assessed as contributing to the agreed programme objectives.
Many of the structural benchmarks and actions in the latest MEFP, the ministry stated, are derived from reforms already undertaken or initiated by Pakistan, rather than being externally imposed.
The ministry provided clarifications for each of the 11 measures characterized as “new conditions.” for example, the public disclosure of asset declarations of civil servants was part of the EFF programme since the initial MEFP in May 2024.
Pakistan continues Economic Reforms Under IMF Programme, Focusing on Sugar, Energy, and Tax Sectors
The Pakistani government is continuing to implement a series of economic reforms as part of its Extended Fund Facility (EFF) program with the International Monetary Fund (IMF). Recent measures, outlined in the latest Memorandum of Economic and Financial Policies (MEFP), focus on deregulation of the sugar industry, privatization of power distribution companies, and strengthening tax administration, according to a statement from the Ministry of Finance.
Sugar Industry Deregulation: The government,through a task force established by the Prime Minister’s Office and chaired by the Minister for Power,is moving towards full liberalization of the sugar market. This initiative aligns with the IMF’s objective of reducing government intervention in commodity markets and has been designated a structural benchmark within the EFF program. https://www.dawn.com/news/1950308
Tax Revenue Mobilization: Efforts to increase domestic revenue are being led directly by the Prime minister, with a thorough roadmap developed for the Federal Board of Revenue (FBR). Key steps already taken include approval of a transformation plan, the establishment of a Tax Policy Office – designed to separate policy formulation from operational functions – and strengthening of compliance risk management. These actions build upon commitments made to the IMF in May 2024 and March 2025. The advancement and publication of a medium-term tax reform strategy is seen as a natural progression of these reforms.
Energy Sector Privatization: The privatization of distribution companies (Discos) remains a central component of the EFF program. The process is intended to occur in phases,with the current focus on finalizing preconditions for private-sector participation in Hyderabad Electric Supply Company (hesco) and Sukkur Electric Power Company (Sepco). The signing of Public Service Obligation (PSO) agreements with the seven largest entities also demonstrates continued progress on this front. https://www.dawn.com/news/1926172
Regulatory and Corporate Compliance: Amendments to the Companies Act, 2017, aimed at strengthening compliance for unlisted firms, are underway as part of a broader regulatory reform agenda designed to improve the business climate. Moreover, a concept note for amendments to the Special Economic Zones (SEZ) Act is being developed, following a prior assessment study. The current SEZ Act can be found here: https://pakistancode.gov.pk/english/UY2FqaJw1-apaUY2Fqa-apaUY2Fpapc=-sg-jjjjjjjjjjjjj
Contingency Planning: The government has also implemented contingency measures to address potential revenue shortfalls, a framework established in May 2024. This includes the introduction of a 5% Federal Excise Duty on fertilizer and pesticides, as initially outlined in the MEFP.
The Ministry of Finance emphasized that these measures represent a continuation and deepening of pakistan’s agreed-upon reform agenda under the IMF’s EFF, rather than the imposition of new or unexpected conditions.
Sources:
* Dawn: https://www.dawn.com/news/1950308
* dawn: https://www.dawn.com/news/1926172
* Pakistan code: https://pakistancode.gov.pk/english/UY2FqaJw1-apaUY2Fqa-apaUY2Fpapc=-sg-jjjjjjjjjjjjj