The International Monetary Fund (IMF) has set a new set of structural benchmarks for Pakistan under its ongoing program, covering fiscal discipline, tax administration reforms, governance, energy pricing, monetary policy and investment deregulation.
In a report issued at the completion of the third review of the Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF), it said Pakistan must secure parliamentary approval of its FY27 budget “in line with IMF staff agreement to meet program targets.” This, it said, includes achieving an underlying primary balance of 2% of GDP by end-June 2026 to ensure fiscal objectives are achieved.
The IMF report requires authorities to prepare an audit manual and audit policy by end-August 2026, centralizing audit case selection through administrative prioritization and strengthening monitoring of high-risk cases via the Compliance Risk Management system to align revenue administration with international best practices.
By end-September 2026, Pakistan must amend Public Procurement Regulatory Authority (PPRA) rules to eliminate preferences for state-owned enterprises in public procurement contracts awarded without competition, aimed at ensuring transparency and a level playing field.
On governance, the IMF said Pakistan must enhance the autonomy and transparency of the National Accountability Bureau (NAB) by end-January 2027 through legislative amendments introducing a merit-based, competitive selection process for senior management. Additionally, it has sought the publication of investigation and prosecution rules and annual statistics on corruption cases.
The report also calls for annual inflation and generosity adjustments to the Benazir Income Support Program’s Kafaalat cash transfer scheme by end-January 2027 to maintain the real purchasing power of beneficiaries.
In the monetary and financial sector, the State Bank of Pakistan (SBP) is required to develop a roadmap for gradual foreign exchange regime liberalization by end-March 2027, including sequencing based on macroeconomic and financial stability conditions.
Energy sector benchmarks include semi-annual gas tariff adjustments due on July 1, 2026 and Feb. 15, 2027, along with an annual power tariff adjustment on Jan. 15, 2027, all aimed at maintaining cost recovery pricing.
In trade and investment reforms, Pakistan is required to amend the Special Economic Zones Act and the Special Technology Zones Authority Act by end-June 2027 to phase out existing fiscal incentives and transition to cost-based incentives, while also ending the role of multiple authorities in granting tax incentives. The IMF also said Islamabad must establish a Pakistan Regulatory Registry as a legally authoritative source for business regulations applicable to the federal government and Islamabad Capital Territory, aimed at reducing regulatory uncertainty and improving transparency.
Praise for recovery
The lender’s report credits Pakistan’s steady policy execution for preserving economic stability and improving financing conditions, emphasizing the need to maintain disciplined policies and accelerate structural reforms to build resilience and secure sustainable long-term growth.
Acknowledging Pakistan’s “significant progress” under its reform program to stabilize the economy and rebuild confidence amid a challenging global environment, it said fiscal performance has been strong, while inflation has spiked due to higher global commodity prices.
Noting total disbursements under both of Pakistan’s programs had now reached $4.8 billion, it maintained the EFF had played a central role in restoring macroeconomic stability, improving confidence, and rebuilding external buffers in an environment of continued global uncertainty.
The IMF said Pakistan’s growth momentum picked up in the first half of FY26, inflation was contained and the current account stayed broadly balanced. Foreign exchange reserves also improved more than expected, reaching about $16 billion by the end of December, up from $14.5 billion mid-year. However, it warned, the Middle East conflict has introduced fresh uncertainty into the economic outlook.
The lender emphasized that continued fiscal discipline will prove critical, particularly efforts to maintain primary surpluses and broaden the tax base. It also urged improvements in public financial management and spending efficiency to support long-term stability.
While praising the central bank for maintaining a tight monetary stance aimed at anchoring inflation expectations, the IMF emphasized the need for continued vigilance against potential price pressures.
On external accounts, the IMF reiterated that exchange rate flexibility should remain the primary buffer against shocks, alongside ongoing efforts to deepen foreign exchange markets and rebuild reserves. It reiterated the need for structural reforms to achieve sustained growth, including reforms of state-owned enterprises, improvements in governance, and measures to enhance the business environment and attract private investment.
IMF Acting Chair Nigel Clarke said maintaining reform momentum would be crucial to safeguarding fiscal sustainability, strengthening financial stability, and supporting inclusive long-term growth. “Under the baseline scenario, the war is expected to put upward pressure on inflation and weigh on growth and the balance of payments, but the overall impact is expected to be contained. However, downside risks are high,” the report warned.