IMF adds 11 tough new conditions to Pakistan bailout deal, warns of India tensions

The IMF has added 11 new conditions to Pakistan’s bailout program, bringing the total to 50. These include tough budget targets, energy reforms, and trade liberalisation, while warning that India-Pakistan tensions could derail progress.

The International Monetary Fund (IMF) has added 11 new conditions to Pakistan’s ongoing bailout program, making the deal more demanding. The total number of IMF conditions for Pakistan has now reached 50, including structural benchmarks and performance targets.

The new conditions are part of the IMF's latest staff-level report, which was released on Saturday. The report also includes a warning that rising India-Pakistan tensions could affect Pakistan’s economic progress and hurt the success of the bailout.

“Rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten risks to the fiscal, external and reform goals of the programme,” the IMF report said.

Here are the 11 new IMF conditions Pakistan must meet:

1. Approval of Rs 17.6 trillion federal budget

Pakistan must pass a new federal budget for the fiscal year 2025–26 through Parliament by June 2025, matching IMF’s financial targets.

2. Agricultural income tax reform

All four provinces must implement agricultural tax reforms by June 2025, including:

• Taxpayer identification and registration
• Plans to improve tax compliance
• Public awareness campaigns
• A digital system for processing tax returns

3. Governance reform strategy

The government must publish a governance action plan based on the IMF’s recent Governance Diagnostic Assessment.

4. Post-2027 financial sector plan

Pakistan must create and publish a long-term financial strategy covering regulatory goals and institutional reforms after 2027.

5. Annual electricity tariff rebasing

By July 2025, the government must announce new cost-based electricity tariffs to keep prices aligned with actual power generation costs.

6. Gas tariff adjustment

A semi-annual gas pricing adjustment is required by February 2026 to ensure full cost recovery in the gas sector.

7. Captive power levy ordinance

The ordinance on taxing industrial units using captive power (private energy generation) must be made permanent by May 2025 to push industries to shift to the national grid.

8. Remove debt servicing surcharge cap

Parliament must remove the Rs 3.21 per unit limit on the electricity debt servicing surcharge through new legislation by June 2025.

9. Phase-out of tech zone incentives

Pakistan must present a phase-out plan by end of 2024 to remove all fiscal incentives for special technology zones (STZs) and industrial parks by 2035.

10. Used car import liberalisation

By July 2025, the government must present legislation to Parliament to lift restrictions on importing used cars, allowing vehicles up to five years old for commercial import.

11. Minimum development spending

Out of the Rs 17.6 trillion total budget, Pakistan must ensure at least Rs 1.07 trillion is spent on development projects.

These new steps add more pressure on Pakistan’s fragile economy as it seeks to secure future IMF tranches. The IMF is pushing for serious structural changes, especially in the energy sector, tax system, and trade policy.

The warning about India-Pakistan relations shows that geopolitical stability is also key to Pakistan’s economic recovery.

With tight deadlines and strict benchmarks, the road ahead for Pakistan under the IMF program remains tough but crucial for long-term financial stability.

On May 9, the IMF reviewed the Extended Fund Facility (EFF) lending programme (USD 1 billion) and also considered a fresh Resilience and Sustainability Facility (RSF) lending programme (USD 1.3 billion) for Pakistan.

Reportedly, the recent review approval brings disbursements to USD 2 billion within the USD 7 billion programme for Pakistan.