ISLAMABAD – The International Monetary Fund imposed 11 new conditions on Pakistan during the second review of its $7 billion extended fund facility on Thursday. These target corruption, tax reforms, and sector liberalisation to unlock $1.2 billion in funding under new IMF Pakistan conditions. The total now stands at 64 structural benchmarks since the programme’s start in September 2024.
The IMF’s conditions for Pakistan underscore deeper governance flaws exposed by a recent diagnostic report, amid Pakistan’s fragile recovery from floods and inflation. For South Asia, where remittances and trade underpin growth, these reforms could stabilize Pakistan’s economy, but risk short-term hardships, such as higher taxes, which could influence regional fiscal dynamics and investor confidence.
IMF 11 New Conditions Pakistan: Targets for Governance Overhaul
The IMF’s staff report outlined the IMF’s 11 new conditions Pakistan must meet. These build on prior commitments, focusing on vulnerabilities flagged in the November 2025 Governance and Corruption Diagnostic Assessment. The report identified weaknesses in legal frameworks, public investment, and oversight that erode economic performance.
Key among the IMF’s 11 new conditions is the publication of asset declarations for high-level federal civil servants by December 2026. Banks will gain full access to verify income-asset mismatches. Expansion to provincial officials follows suit. This measure aims to curb elite capture, which the IMF estimates drains 6% of GDP annually.
By October 2026, Pakistan must deliver an action plan to mitigate corruption risks in 10 high-risk departments. The National Accountability Bureau leads this effort, drawing on risk assessments. Provincial anti-corruption bodies receive financial intelligence and capacity-building support. These steps address systemic gaps in investigation and enforcement.
The IMF staff report, released on 11 December 2025, noted favourable financial conditions. Pakistan achieved its first current account surplus in 14 years for FY25, at $0.7 billion in the first eight months. Gross reserves reached $10.7 billion by the end of March 2025, exceeding targets. Yet, FY26 growth dips to 2.8% due to the impact of floods, according to IMF projections.
Headline inflation fell to 0.3% in April 2025, allowing the State Bank of Pakistan to cut rates by 1100 basis points since June. Despite progress, the IMF emphasizes the need for sustained reforms to build buffers against future shocks.
Pakistan IMF Bailout Reforms: Fiscal and Sectoral Mandates
Pakistan’s IMF bailout reforms dominate the new conditions. By the end of December 2025, the government commits to a mini-budget if revenues fall short of targets. Measures include raising federal excise duty on fertilisers and pesticides by 5%, taxing high-value sugary items, and broadening sales tax to standard-rate items.
The Federal Board of Revenue faces scrutiny. By December 2025, Pakistan must finalize a reform roadmap that includes staffing assessments, timelines, revenue impacts, and key performance indicators. At least three priority areas roll out immediately, covering legislation, hiring, and reporting. A medium-term tax strategy follows by December 2026, sequencing policy, administration, and legal changes.
In the power sector, the preconditions for private participation in the Hyderabad Electric Supply Company and Sukkur Electric Power Company are to be finalised by December 2026. Public service obligation agreements are signed with the seven largest entities before the next budget. These address circular debt, pegged at PKR 2.4 trillion.
Corporate governance sees updates. Amendments to the Companies Act 2017 are to be prepared by December 2026 to ensure compliance and international alignment for unlisted firms. A concept note on Special Economic Zones Act reforms is published, detailing the scope, objectives, and KPIs.
The IMF report highlights remittance challenges. Costs could rise to $1.5 billion over the next two years, straining import financing. A comprehensive assessment and action plan due by May 2026 targets structural barriers.
IMF Pakistan Corruption Reforms: Tackling Elite Capture in Sugar
IMF Pakistan corruption reforms form the core of the 11 additions. The sugar sector exemplifies elite influence. By June 2026, the federal and provincial governments are expected to adopt a national liberalization policy. It covers licensing, price controls, import/export permissions, zoning, and timelines to dismantle barriers.
This follows the diagnostic assessment’s findings on sector-specific graft. Sugar mills, often linked to politicians, distort markets and inflate costs. The policy aims to foster competition, potentially saving PKR 100 billion in subsidies yearly.
Broader IMF Pakistan corruption reforms empower provincial bodies. They gain access to financial intelligence for probes. Capacity support continues to handle complex cases. The National Accountability Bureau coordinates federal efforts.
The assessment, conducted by IMF experts including Joel Turkewitz and Jonathan Pampolina, analysed 10 sectors. It revealed procurement flaws costing 2-3% of GDP and weak enforcement in anti-money laundering.
Pakistan’s poverty rate stands at 21.9%, per World Bank data. These reforms seek to redirect resources, but implementation lags risk tranche delays.
Background: Evolution of the $7 Billion Programme & IMF Pakistan Conditions
The $7 billion extended fund facility commenced in September 2024, following the lapse of a previous program. The first review in May 2025 unlocked $1 billion, citing progress on fiscal consolidation. Reserves rebuilt from $9 billion to $10.7 billion.
Floods in late 2025 damaged approximately 1.5 million hectares of crops, according to government estimates. The Resilience and Sustainability Facility integrates climate measures, with $500 million in funding approved.
A total of 64 conditions were reached, reflecting the programme’s stringency. Prior benchmarks covered subsidy cuts and energy pricing, yielding a primary surplus of 1% of GDP in FY25.
South Asian peers watch closely. India’s remittances to Pakistan total $500 million annually, making them vulnerable to cost hikes. Regional trade, at $2.5 billion, hinges on stability.
What’s Next: Compliance and Tranche Approval
The IMF Executive Board is scheduled to meet in January 2026 to approve the $1.2 billion tranche. Prior actions include passing the mini-budget if needed. Quarterly reviews monitor progress.
By September 2026, a study on local currency bond market bottlenecks will be published, with an action plan. This supports debt sustainability, with external debt at $130 billion.
Finance Minister Muhammad Aurangzeb stated in a press briefing: “We remain committed to the programme’s objectives.” The ministry targets 13.5% tax-to-GDP by FY28. Challenges persist. Political resistance to sugar reforms looms, with mill owners lobbying. FBR collections reached PKR 8.4 trillion in FY25, falling short of the Rs9.4 trillion goal.
The IMF’s conditions for Pakistan signal a long reform path. Success could boost growth to 4% by FY27, according to projections. Failure risks renewed crisis.
The IMF’s conditions for Pakistan define a pivotal test for economic resilience in a flood-prone, debt-burdened nation.
Published in SouthAsianDesk, December 12th, 2025
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