In a decisive move, the International Monetary Fund (IMF) has called on Pakistan to ensure full implementation of economic conditions across all levels of government—not just the federal, but provincial budgets too.
This comes as part of the global lender’s broader agenda for fiscal discipline and sustainable economic reform.
Sources close to the matter revealed that the IMF has sent a clear message: provincial governments must fall in line with the national economic framework under the Fund’s ongoing program. The days of loose spending and relaxed policies at the provincial level are over.
Provinces Under Pressure
The IMF is demanding that all provincial administrations take bold steps to reduce expenses and support a unified economic vision. From stopping subsidies to halting new government jobs, the provinces are being asked to tighten their belts.
One of the major demands is no energy subsidies—meaning provinces can no longer offer financial support for electricity or gas, which has long been a drain on public finances. The IMF also wants an immediate hiring freeze in the public sector to curb recurring costs.
In a push to stimulate private investment, provinces must now simplify procedures and remove red tape to improve the ease of doing business. Moreover, they’re under pressure to increase revenue collection from traditionally under-taxed sectors like agriculture and services.
Another critical step? Digitalization of accounts. The IMF wants all provincial financial systems fully digitized to enhance transparency and cut corruption.
Political Unity Essential
To avoid resistance, the IMF has advised that all provincial assemblies bring political parties on board. Budgets must reflect this reform agenda and be passed with political consensus. In short, there's no room for economic backpedaling.
As Islamabad nears completion of the federal budget for 2025-26, talks with the IMF have entered a crucial stage. Officials from the Ministry of Finance confirmed that the Fund has laid out several hard-hitting recommendations, including cutting non-development expenses, banning foreign travel for non-filers, and limiting subsidies strictly to low-income groups.
While the IMF has agreed to a modest salary hike for government employees, it insists on strict fiscal discipline. Notably, the Fund has approved an increase in the defence budget.
Tough Targets Ahead
One of the hottest topics in the negotiations is the IMF’s proposed tax collection target of Rs14,300 billion. The Pakistani side is hoping to lower that figure as discussions continue. However, the IMF is adamant about scrapping broad tax exemptions, introducing a carbon levy, and incorporating agricultural taxation into the formal budget plan.
As Pakistan’s leadership walks a fiscal tightrope, the message from the IMF is loud and clear: without the full implementation of economic conditions, future funding could be at risk.
