In a last-minute move before Pakistan finalises its federal budget for FY2025-26, the International Monetary Fund (IMF) has issued a fresh set of demands under the terms of the proposed new loan programme, calling for strict implementation of agreed reforms at both federal and provincial levels.

According to official sources, the IMF has emphasised that the budget’s approval is contingent on the comprehensive execution of all previously agreed reform measures. This includes written commitments from provincial governments to reduce expenditures and enhance the ease of doing business.

One of the core demands is the complete elimination of subsidies on electricity and gas at both federal and provincial levels. The IMF has also urged the government to impose a ban on new hiring in the public sector and to take serious steps towards rightsizing the bureaucracy.

Moreover, the Fund has called for a coordinated federal-provincial crackdown on power and gas theft and smuggling, as well as consensus-building within the Parliament over key budgetary targets.

IMF urges Pakistan to phase out tax breaks for tech, industrial zones

Provincial governments have been asked to incorporate specific action plans in their respective budgets for the taxation of agricultural income and services, areas previously considered politically sensitive.

The IMF’s latest set of requirements appears to be a crucial step toward finalising a new loan agreement with Pakistan, which is seeking much-needed financial support amid a fragile economic recovery.

IMF tells govt to draft budget 2025–26 under staff-level agreement