The International Monetary Fund (IMF) has demanded strict implementation of all previously agreed economic conditions, not just from the federal government, but from all four provinces as well.
According to reports, the IMF has laid down clear instructions: provincial budgets must reflect the same level of fiscal discipline as the federal plan.
These IMF budget reform demands come at a time when Islamabad is gearing up to finalize its federal budget for 2025-26 amid crucial negotiations with the global lender.
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Provinces under pressure
The IMF has made it clear:the days of unchecked provincial spending are over. Here’s what the provinces are being told to do:
- No more energy subsidies: Subsidies on electricity and gas at the provincial level will no longer be allowed.
- Hiring freeze: No new government jobs can be created, aiming to control the ever-growing salary burden.
- Boost revenue: Provinces must increase tax collection, particularly from agriculture and services—areas that have long been under-taxed.
- Ease business rules: Streamline rules to draw in private investment and encourage entrepreneurship.
- Digitalize everything: All provincial financial systems must be fully digitized to enhance transparency and efficiency.
The IMF is also pushing for a unified economic vision, calling on provinces to align with federal goals—whether it’s cracking down on electricity theft, smuggling, or resisting policies that derail national reform.
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Political consensus a must
One of the more politically sensitive IMF budget reform demands is the requirement for provincial assemblies to pass budgets that comply with these new conditions. The IMF insists that all political parties in the assemblies be taken into confidence before approving such budgets to ensure smooth implementation.
What’s on the table for federal budget 2025-26?
As the deadline for the national budget approaches, Pakistan’s finance officials are locked in tough negotiations with the IMF. Some of the global lender’s latest recommendations include:
Know More: Pakistan budget 2025-26: IMF approves tax relief for salaried class
- Cut non-development expenses: Trim the fat from the government’s running costs.
- Restrict non-filers: A ban on foreign travel and luxury purchases like property and vehicles for tax non-filers.
- Limit subsidies: Only the poorest should benefit—blanket subsidies are off the table.
- Salary increase approved: A modest increase in government wages has been approved by the IMF.
- Defence budget approves green light: In contrast to reductions elsewhere, the army will receive a budget boost.
- Tax target tensions: The IMF has suggested setting a tax collection target of Rs14,300 billion—an ambitious target that Islamabad hopes to negotiate lower.
Additionally, the IMF is pushing for an end to tax exemptions in agriculture and industry, while calling for a carbon levy to be introduced and enforced across the board.
