ISLAMABAD (PEN) : The International Monetary Fund (IMF) has called on Pakistan to ensure complete implementation of all agreed-upon economic reforms under the upcoming Budget 2025–26, urging both federal and provincial governments to align with the broader fiscal framework.
As the country nears the finalization of its federal budget, ongoing discussions with the IMF have entered a critical phase. The Fund has emphasized that provincial governments must adopt stringent fiscal discipline, reinforcing a unified national strategy for economic stabilization.
Provincial Alignment a Key Requirement
Sources familiar with the negotiations said the IMF has demanded that provincial budgets reflect core reform measures. These include:
No energy subsidies on electricity and gas at the provincial level.
A freeze on public sector hiring to limit non-development expenditures.
Acceleration of the digitalization of financial accounts to improve transparency.
Enhancement of tax collection from under-taxed sectors*, particularly agriculture and services.
Removal of regulatory hurdles to boost private sector investment and job creation.
Coordination with federal authorities to combat smuggling and curb electricity and gas theft.
Additionally, provinces have been instructed to *avoid opposing the federal economic reform agenda* and to provide full support for shared targets.
Political Consensus Urged for Budget Approval
To ensure smooth legislative approval, the IMF has *advised provincial administrations to engage all parliamentary political parties*. According to officials, gaining cross-party support for the budget and reform strategy is vital to maintaining economic stability and public confidence.
Federal Budget Talks: Key IMF Conditions
Negotiations between Pakistan and the IMF also involve key fiscal targets and structural reforms. The IMF’s major budget recommendations include:
Significant cuts in non-developmental expenditures*
A ban on foreign travel and asset purchases* (vehicles, property) by non-filers
Limiting subsidies strictly to low-income populations*
A proposed tax revenue target of Rs14,300 billion*, though Pakistani officials are seeking to negotiate a lower figure
Removal of broad tax exemptions*, including those in the agriculture and industrial sectors
Implementation of a carbon levy*
Inclusion of agricultural taxation measures* in the upcoming budget
The IMF has conditionally agreed to a *modest increase in government salaries* and has approved a rise in the defence budget, according to Ministry of Finance sources.
Outlook
With just days to go before the budget presentation, Pakistan faces the dual challenge of meeting IMF expectations while balancing domestic political and economic realities. The successful implementation of these conditions is expected to play a decisive role in securing further tranches of IMF support and sustaining macroeconomic recovery.
