IMF sets sweeping reform benchmarks for Pakistan across fiscal, energy and governance sectors

The International Monetary Fund (IMF) has set a series of new structural benchmarks for Pakistan covering fiscal reforms, governance, energy pricing, financial sector oversight and investment policy under its ongoing programme, according to an IMF staff report.

The report said Pakistan will secure parliamentary approval of the FY27 budget in line with IMF staff agreements, including an underlying primary surplus target of 2% of GDP by end-June 2026 to ensure fiscal objectives are met.

Among revenue measures, the IMF said authorities are required to collect PKR 322 billion, equivalent to 0.3% of GDP, from disputed taxpayer obligations in cases where courts have ruled in favour of the Federal Board of Revenue (FBR).

The Finance Secretary will also issue a decision on FY26 expenditure savings, to be presented before the National Assembly alongside the FY27 budget, to offset projected tax revenue shortfalls and maintain the FY26 underlying primary surplus target of 1.6% of GDP.

The report reiterated a commitment that authorities will not grant tax amnesties or introduce new preferential tax treatments, including exemptions, zero-rating, tax credits, accelerated depreciation allowances or special rates.

The IMF document noted a structural benchmark requiring the introduction of a 5% Federal Excise Duty (FED) on fertiliser and pesticide by end-June 2025 to protect tax revenues, but said the target was “not met.”

To strengthen tax administration, Pakistan will prepare an audit manual and audit policy centralising audit case selection through administrative prioritisation and monitoring of high-risk cases via the Compliance Risk Management system by end-August 2026.

In procurement reforms, authorities are required to amend Public Procurement Regulatory Authority (PPRA) rules by end-September 2026 to eliminate state-owned enterprise (SOE) preferences in awarding public contracts without competition, aiming to ensure transparency and a level playing field.

On governance reforms, the IMF said Pakistan will enhance the autonomy and transparency of the National Accountability Bureau (NAB) by submitting amendments to parliament by end-January 2027. The amendments would introduce an open and merit-based process for appointing senior management, establish pre-determined qualification criteria, and create a multisector stakeholder committee for selections in line with recommendations of the Governance and Corruption Diagnostic report.

The reforms also require publication of NAB investigation and prosecution rules and annual statistics on corruption investigations, prosecutions and convictions.

The report said Pakistan will publish asset declarations of high-level federal civil servants on a government website in line with legislative amendments passed in June 2025. That benchmark, due by end-December 2026, remains “in progress.”

Another governance benchmark, also marked “in progress,” requires authorities to publish by end-October 2026 an action plan to mitigate corruption vulnerabilities in identified departments, using a methodology approved by the Anti-Corruption and AML/CFT Committee chaired by the Ministry of Law and Justice in consultation with IMF staff.

On social protection, the IMF said Pakistan will carry out annual inflation and generosity adjustments to quarterly benefits under the Benazir Income Support Programme’s Kafaalat unconditional cash transfer scheme by end-January 2027 to preserve beneficiaries’ purchasing power.

In the monetary and financial sector, the State Bank of Pakistan (SBP) is required to develop a roadmap for gradual liberalisation of the foreign exchange regime by end-March 2027, including sequencing based on macroeconomic and financial stability conditions.

The report also noted that a benchmark requiring undercapitalised private banks to be placed under resolution by end-November 2024, unless recapitalised or merged, was “not met.”

Authorities are required to prepare and publish a post-2027 financial sector strategy by end-June 2026, while another benchmark calls for completion of a comprehensive assessment of remittance costs and barriers to cross-border payments by end-May 2026. Both measures remain “in progress.”

The IMF further said Pakistan will conduct a study on bottlenecks in local currency bond market development and publish a strategic action plan aimed at diversifying the investor base.

In the energy sector, Pakistan committed to maintaining tariffs at cost-recovery levels through semi-annual gas tariff adjustments scheduled for July 1, 2026 and Feb. 15, 2027, along with an annual power tariff adjustment due Jan. 15, 2027.

The report said a benchmark requiring elimination of captive power usage in the gas sector by end-January 2025 was “not met.”

Another energy benchmark requires authorities to finalise preconditions for private sector participation in HESCO and SEPCO by end-December 2026. The measure remains “in progress.”

On SOE governance, Pakistan is required to amend the Sovereign Wealth Fund (SWF) Act and related legislation by end-March 2026 to align governance mechanisms with international standards and strengthen fiscal safeguards. The benchmark was marked “not met.”

In trade and investment policy, the IMF said Pakistan will enact amendments to the Special Economic Zones (SEZ) Act and the Special Technology Zones Authority (STZA) Act by end-June 2027 to phase out existing fiscal incentives and shift from profit-based to cost-based incentives.

The reforms would also end the role of the Board of Approval, Board of Investment and existing SEZ authorities in granting tax incentives.

The IMF separately noted that a benchmark to prepare a plan for fully phasing out all existing SEZ and Export Processing Zone incentives by 2035 had been “not met,” although implementation was delayed until October.

Authorities are also required to establish the Pakistan Regulatory Registry as a legally authoritative source for federal and Islamabad Capital Territory business regulations to reduce regulatory uncertainty.

The report said the federal and provincial governments will agree on, and the federal cabinet will adopt, a national sugar market liberalisation policy by end-June 2026. The policy will address licensing, price controls, import and export permissions, zoning restrictions and implementation timelines. The benchmark remains “in progress.”

Another “in progress” benchmark requires amendments to the Companies Act 2017 by end-June 2026 to strengthen compliance requirements for unlisted firms, modernise corporate governance and align regulations with international standards.

Pakistan is also required to prepare and publish a concept note by end-June 2026 outlining proposed amendments to the SEZ Act, including reform rationale, key performance indicators and a transition from profit-based to cost-based incentives.