Pakistan has only met two out of five major financial conditions set by the International Monetary Fund (IMF) for the second review of its $7 billion bailout package, raising concerns about the country's economic reforms.

According to official data, while the government managed to achieve a primary budget surplus of Rs 2.7 trillion, surpassing the IMF’s target of Rs 2.4 trillion, and fulfilled the condition related to combined provincial revenue collection, three key conditions were missed.

What Conditions Were Not Met?

1. Provincial Cash Surplus Shortfall: The four provinces were supposed to generate a cash surplus of Rs 1.2 trillion, but they managed only Rs 921 billion — falling short by Rs 280 billion.

2. Tax Revenue Shortfall: The Federal Board of Revenue (FBR) collected Rs 11.74 trillion, falling short of the IMF’s target of Rs 12.32 trillion.

3. Retail Tax Collection Failure: The government also failed to collect Rs 50 billion from retailers under a business-friendly scheme that was part of the agreement with the IMF.

Each province recorded a surplus, but not enough to meet the joint commitment. Punjab, with revenue of Rs 4 trillion, spent Rs 3.6 trillion, producing a surplus of Rs 348 billion. However, a statistical discrepancy of Rs 41 billion was also reported.

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Sindh posted a Rs 283 billion surplus after spending Rs 2.3 trillion, while also noting Rs 48 billion in statistical gaps. Khyber Pakhtunkhwa recorded a Rs 176 billion surplus, earning Rs 1.5 trillion and spending Rs 1.3 trillion, along with a statistical discrepancy of Rs 155 billion.

Despite missing the surplus target, provinces exceeded the tax collection goal set by the IMF, collecting Rs 979 billion, which is Rs 58 billion more than the target.

While the primary surplus condition was met, Pakistan’s net federal income still falls short by Rs 1.2 trillion when covering just two expenses — debt servicing and defence. This means the government continues to rely on borrowed funds to meet other expenditures.

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Even with a 2.4% of GDP primary surplus, the IMF's concern remains around sustainable revenue collection and reliable provincial cooperation.

Despite missing some conditions, the overall progress is expected to be enough to avoid any major hurdles during the upcoming review talks. The IMF is likely to begin the second program review next month, which, if successful, could lead to the release of a $1 billion loan tranche.

The IMF had originally outlined about 50 structural and fiscal conditions in the bailout deal, many of which are tracked quarterly and annually.

Planning Minister Ahsan Iqbal has suggested revising the National Finance Commission (NFC) Award to include new criteria and performance indicators, ensuring that public welfare spending becomes a priority for provinces.