IMF sets 11 new structural benchmarks for Pakistan under $7bn EFF
The Fund in its latest report 'First review under the Extended Fund Facility (EFF) arrangement, requests for modification of performance criteria, and request for an arrangement under the Resilience and Sustainanble Facility (RSF)', noted that 11 new SBs have been set.
The SBs on fiscal side include: (i) parliamentary approval of fiscal year 2026 budget in line with IMF staff agreement to meet program targets and ensure achievement of fiscal objectives (end-June 2025), (ii) implement the new Agriculture Income Tax laws through a comprehensive plan, including the establishment of an operational platform for processing returns, taxpayer identification and registration, a communication campaign, and a compliance improvement plan to protect tax revenue (end-June 2025).
Pakistan meets all 7 QPCs, 5 of 8 ITs and SBs: IMF says policy efforts continue to bear fruit
On governance side (i) publish governance action plan based on the recommendations of the Governance Diagnostic Assessment with the rationale to publicly identify reform measures to address critical governance vulnerabilities (end-October 2025).
On social side (i) annual inflation adjustment of the unconditional cash transfer (Kafaalat) program to maintain UCT real purchasing power (end-January 2026).
On monetary and financial side (i) prepare and publish a plan outlining the government's post-2027 financial sector strategy, outlining the institutional and regulatory environment from 2028 onwards to safeguard financial stability (end-June 2026).
On energy sector (i) notifications of the annual electricity tariff rebasing and gas tariff adjustment to maintain energy tariffs at cost recovery levels (July 1, 2025), (ii) notification of the semi-annual gas tariff adjustment to maintain energy tariffs at cost recovery levels (February 15, 2026), (iii) adopt legislation to make captive power levy ordinance permanent to promote uptake of electricity grid usage and incentivize more efficient use of energy sources (end-May 2025), (iv) adopt legislation to remove the cap on the debt service surcharge to ensure adequate financing is available for CD conversion operation (end-June 2025).
On trade, investment policy, and deregulation side (i) prepare a plan based on the assessment conducted to fully phase out all incentives in relation to Special Technology Zones and other industrial parks and zones by 2035 to improve efficiency and provide a level playing field for investment (end-December 2025), and (ii) submit to parliament all required legislation for lifting all quantitative restrictions on the commercial importation of used motor vehicles (initially only for vehicles less than five years old, subject to meeting minimum environmental and safety standards) to liberalize trade and increase vehicle affordability (end-July 2025).
The report noted the authorities met all seven quantitative performance criteria (PCs) for end-December 2024: the floors on (i) net international reserves of the SBP; (ii) targeted cash transfer spending; and (iii) the number of new tax returns from new filers; and the ceilings on (iv) net domestic assets of the SBP; (v) the SBP's FX swap/forward book; (vi) the general government primary budget deficit; and (vii) government guarantees. They also met both continuous PCs on (i) zero new flow of SBP credit to the government; and (ii) zero external public payment arrears.
The majority of Indicative targets (ITs) were met at end-December, including the ceilings on: (i) the aggregate provincial primary budget deficit; (ii) net accumulation of tax refund arrears; and (iii) power sector payment arrears; and the floors on (iv) revenues collected by provincial revenue authorities; and (v) the weighted average maturity of local currency debt securities.
However, the ITs at end-December were missed for the floors on (i) government health and education spending; (ii) net tax revenues collected by the FBR; and (iii) net tax revenues collected from retailers under the Tajir Dost scheme.
Nine SBs were met, including on approval of a National Fiscal Pact, improving safeguards for monetary policy operations and approval of amendments to bank resolution and deposit legislation. Three continuous SBs on not granting tax amnesties, seeking ex-ante parliamentary approval for any non-budgeted expenditures, and the maximum average premium between the interbank and open market rates were also met.
The SB on provincial AIT legislation was not met at end-October, but this legislation was subsequently passed in February 2025, while another two SBs were missed due to delays in passing amendments to of the Civil Servants and Sovereign Wealth Fund (SWF) Acts, respectively.
Finally, two SBs relating to resolving undercapitalized banks and to captive power producers were missed, but subsequent policy actions are expected to accomplish the underlying objectives.
Copyright Business Recorder, 2025
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