Pakistan’s ongoing engagement with the International Monetary Fund has once again become the subject of intense debate, following reports that the Fund has added eleven new conditions to the country’s $7 billion Extended Fund Facility. These additional conditions have already been accepted by Pakistani authorities. Although the precise details have not yet been formally released, the reports have revived concerns over the economic and political costs of continued programme implementation.
The uncertainty stems from the timing of the IMF’s latest review. On March 27, the Fund announced that a staff-level agreement had been reached on the third review of Pakistan’s EFF programme. Ordinarily, such an agreement would be followed by the announcement of an Executive Board date, after which the next tranche would be approved and detailed programme documents would be made public. In this case, however, no Board date has yet been announced.
That gap between the staff-level agreement and the absence of a Board meeting has naturally fuelled speculation. In Pakistan’s experience with IMF programmes, delays of this nature are often interpreted as a sign that politically sensitive prior actions remain pending before the release of funds. Such assumptions are understandable, particularly given the country’s repeated encounters with difficult fiscal and structural conditions under previous programmes.
Yet the current delay may also be linked to broader external developments rather than purely domestic factors. The continuing instability in the Middle East, particularly disruptions to oil supply routes, has added fresh uncertainty to the global economic outlook. On April 9, Kristalina Georgieva stated ahead of the IMF and World Bank spring meetings that the institution’s immediate focus would be on understanding the nature of the latest shock, its transmission channels, the scale of its economic impact, and the policies required to mitigate its effects.
For Pakistan, this global turbulence carries particular significance. As a major oil-importing country, the economy remains highly vulnerable to fluctuations in international energy prices. Rising oil costs directly affect inflation, the current account, transport costs, and industrial production. In that context, there is hope that any revised programme conditions may take into account the extraordinary pressures created by regional conflict.
Among the conditions reportedly under discussion is an amendment to the Special Economic Zones Act and the Special Technology Zones Authority Act. The proposed change would gradually phase out existing fiscal incentives and replace profit-based incentives with cost-based mechanisms.
This issue is particularly sensitive because of reports that the government is considering offering 6,000 acres of land in Karachi on lease, without charge, to developers of special economic zones. Such proposals have drawn attention because they appear to sit uneasily with the IMF’s earlier concerns about tax privileges and non-transparent incentives.
The October 2024 IMF programme documents had already identified the extensive use of tax exemptions as a source of distortion in Pakistan’s economic framework. According to those documents, privileged sectors such as real estate, agriculture, manufacturing, energy, and special economic zones had benefited from non-transparent support mechanisms. The agreed direction at the time was that existing SEZ incentives would be phased out over a decade and that no new zones would be created.
Another reported condition relates to the establishment of a regulatory registry aimed at improving the business climate. Here too, the measure appears less like a new demand and more like a continuation of earlier commitments. Under the 2024 programme, the government had already pledged to strengthen transparency in public procurement through the **Pakistan Acquisition and Disposal System**.
The electronic procurement system, introduced with technical support from the World Bank, was designed to enhance transparency across federal and provincial governments. By the time of the programme review, 38 of 43 federal ministries and 342 attached departments had been integrated into the system. The proposed regulatory registry therefore appears to build on an existing institutional reform agenda rather than representing a wholly new policy direction.
In the energy sector, reported conditions continue to focus on full-cost recovery. This means that the financial burden arising from borrowing, operational inefficiencies, or delayed adjustments must be reflected in pricing structures rather than absorbed indefinitely by the public sector. Pakistan’s efforts to centralize audit case selection and improve governance within tax administration also appear to be proceeding broadly in line with earlier programme commitments.
A particularly important issue concerns subsidies announced by the government to soften the impact of oil supply disruptions linked to Middle East tensions. There had been some uncertainty over whether such measures would be acceptable under the IMF programme. Reports now suggest that the Fund may have agreed to these interventions, recognising the exceptional nature of current external pressures.
This would represent a pragmatic adjustment. While the IMF traditionally prioritizes fiscal discipline, global shocks of this scale often require temporary flexibility to protect vulnerable households and prevent deeper economic disruption.
Pakistan’s broader diplomatic role also matters in this context. The country has sought to contribute to efforts aimed at reducing tensions in the Middle East, an approach that aligns both with regional stability and domestic economic interest. Nevertheless, as **Ahsan Iqbal** has noted, the economic consequences of the conflict are already substantial.
Higher import costs, pressure on foreign exchange reserves, inflationary spillovers, and tighter global financing conditions are all placing additional strain on an already fragile economy. These realities strengthen the case for revisiting some of the more demanding upfront conditions embedded in the programme.
One practical response lies in fiscal adjustment through expenditure management. Instead of relying excessively on new domestic and external borrowing, the government could focus more seriously on reducing current expenditure. Such restraint would ease financing pressures and help limit the build-up of future debt-servicing obligations.
This is particularly important because the cost of additional borrowing does not remain confined to official balance sheets. It is ultimately transmitted to the public through higher taxes, inflation, reduced development spending, and weaker purchasing power.
In conclusion, the current debate over IMF conditions reflects a broader tension between economic stabilization and domestic sustainability. While structural reform remains necessary, the extraordinary uncertainty created by geopolitical shocks demands a degree of flexibility. Pakistan’s challenge is not simply to meet programme benchmarks but to ensure that stabilization measures remain compatible with economic resilience and social protection. Without such balance, the burden of adjustment will continue to fall most heavily on ordinary citizens.