Following the International Monetary Fund (IMF) Executive Board’s approval of a $7 billion Extended Fund Facility (EFF) for Pakistan, and the immediate release of approximately $1.1 billion, the stringent conditions attached to the loan program have emerged.
According to sources in the Ministry of Finance, the IMF has stipulated that Pakistan will revise the NFC (National Finance Commission) Award formula. The IMF will monitor provincial government expenditures.
Conditions include ongoing negotiations between the federal and provincial governments on a National Finance Pact; Pakistan will not provide energy subsidies exceeding 1% of GDP; Pakistan will not release supplementary grants during the IMF program.
Sources also indicate that conditions include bringing the agricultural sector into the tax net; bringing the property and retail sectors into the tax net; implementing reforms to reduce electricity prices; the government will introduce a comprehensive package to reduce electricity prices; and a review of power purchase agreements in the energy sector.
The conditions state that future electricity price relief will not be provided in the style of the Punjab government; subsidized food prices will not be set; and the federal government’s structure will be downsized.
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