Pakistan’s engagement with the International Monetary Fund (IMF) has entered a decisive new phase. In its latest review under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF), the IMF has laid out 11 new structural benchmarks (SBs)—expanding conditionalities into the deepest layers of Pakistan’s economy: taxation, governance, anti-corruption, financial markets, state-owned enterprises (SOEs), energy reforms, and trade policies.
The IMF’s new benchmarks are not merely procedural checkboxes. They represent a multi-year blueprint designed to reshape Pakistan's revenue base, strengthen institutions, modernize governance, and ensure long-term financial stability.
This expanded reform agenda comes after the Fund confirmed that eight out of 13 previous structural benchmarks were met, including major steps like agricultural income tax legislation and tightening asset disclosure laws for public officials.
Below is a detailed breakdown of the IMF’s new conditions—and what they mean for Pakistan’s economic future.
1. Transforming Pakistan’s Tax System: The Heart of IMF’s Demands
IMF’s Push for Revenue Sustainability
The IMF has made it clear that Pakistan’s low tax-to-GDP ratio remains one of the most serious obstacles to economic stability. To address this, it has imposed a structured, time-bound set of tax reforms.
1.1 Tax Reform Roadmap by December 2025
By the end of 2025, Pakistan must deliver a comprehensive tax reform roadmap that includes:
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Key reform priorities
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Staffing and resource needs
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Digital system requirements
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Timeline for implementation
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Estimated revenue gains
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KPIs such as audit targets and digital invoicing expansion
This roadmap will serve as a master plan for rebuilding Pakistan’s taxation framework.
1.2 Three Priority Reforms by March 2026
Pakistan must implement at least three major reforms agreed with IMF staff. These may include:
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Integration of provincial and federal tax systems
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Digitalising the sales tax supply chain
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Expanding income tax coverage to retail, agriculture, and real estate
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Improving audit and enforcement capacity
1.3 Five-Year Tax Strategy by December 2026
To stabilize revenue generation, Pakistan must publish a 3–5 year tax strategy, outlining:
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Sequenced policy changes
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Legal amendments
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Governance systems
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Implementation mechanisms
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Revenue predictability models
This long-term document will serve as the backbone of future budgets.
2. Governance, Transparency & Anti-Corruption: A New Era of Accountability
The IMF is now placing unprecedented emphasis on governance reforms—reflecting global concerns about weak institutional oversight in Pakistan.
2.1 Public Asset Declarations of Senior Officials (by Dec 2026)
Pakistan must publish asset declarations of high-level federal civil servants on a publicly accessible website. This requirement follows recent legislative amendments aimed at improving transparency.
2.2 Anti-Corruption Action Plan (by Oct 2026)
After conducting institutional risk assessments, Pakistan must publish a detailed action plan focused on reducing corruption vulnerabilities in:
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Tax agencies
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Energy sector
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SOEs
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Public procurement institutions
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High-risk ministries
The IMF is increasingly viewing corruption control as essential to economic reform—not optional.
3. Financial Sector & Monetary Reforms
The Fund has added new financial-sector requirements to enhance transparency, market competitiveness, and foreign exchange stability.
3.1 Reducing Remittance Costs & Boosting FX Inflows (by May 2026)
Pakistan must conduct a detailed analysis of:
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Remittance fees
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Banking barriers
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Informal channel leakages
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Digital solutions for cross-border payments
This will be followed by a roadmap to increase formal remittance inflows—critical for Pakistan’s external accounts.
3.2 Reforming Local Bond Markets (by Sept 2026)
Pakistan must complete a study and publish a strategy to:
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Deepen local currency bond markets
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Diversify investor profiles
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Improve debt management efficiency
A deeper bond market reduces reliance on expensive short-term domestic borrowing.
4. Energy Reforms & SOE Overhauls: Fixing Pakistan’s Financial Black Holes
4.1 HESCO and SEPCO Reforms (by Dec 2026)
To reduce losses in power distribution companies, Pakistan must finalize preconditions for private-sector participation in:
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Hyderabad Electric Supply Company (HESCO)
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Sukkur Electric Power Company (SEPCO)
Privatization or public-private partnerships are being pushed to address years of mismanagement and systemic inefficiencies.
4.2 PSO Agreements for Major SOEs (before FY2027 Budget)
Pakistan must sign public service obligation agreements with its seven largest SOEs. These agreements will clearly define:
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The social services SOEs must provide
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Their financial costs
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Government compensation mechanisms
This step aims to end the opaque budgeting practices that have historically driven huge losses.
5. Trade, Investment & Deregulation Reforms: Opening the Economy by 2026
The IMF has added several new trade and deregulation benchmarks to improve market competitiveness.
5.1 Sugar Market Liberalisation Policy (by June 2026)
Pakistan must develop a full liberalisation plan covering:
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Price controls
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Sugar mill licensing
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Import/export rules
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Zoning and production regulations
This comes after the government breached an IMF condition by allowing tax exemptions on sugar imports.
5.2 Amendments to Companies Act 2017 (by June 2026)
These amendments are intended to:
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Modernize corporate governance
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Improve investor protection
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Strengthen compliance mechanisms
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Support capital market development
5.3 Overhaul of SEZ Incentives (Concept Note by June 2026)
Pakistan must shift from profit-based to cost-based incentives for Special Economic Zones. The IMF wants SEZs to operate transparently and be linked to measurable KPIs rather than arbitrary tax concessions.
6. Missed, Reset, and Replaced Benchmarks
The IMF noted several delays:
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Governance & Corruption Diagnostic was published late (now counted as a prior action).
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SEZ phase-out was completed in October 2025 after missing the original deadline.
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SOE legal amendments have been postponed to August 2026.
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Continuous benchmark on avoiding tax exemptions was violated due to sugar import concessions.
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Excise duty on pesticides/fertilisers was delayed due to flood concerns but may be imposed if required.
7. Performance Criteria & Pakistan’s Progress
Pakistan successfully met six out of seven IMF-defined performance criteria for June 2025:
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SBP foreign reserves floor
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Limit on new government guarantees
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Ceilings on SBP net domestic assets
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FX swap limits
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Primary deficit ceiling
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Number of new tax return filers
Indicative Targets Met:
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Domestic debt maturity
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Provincial tax collections
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Controlling power sector arrears
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Borrowing efficiency
Indicative Targets Missed:
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Health spending
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Education spending
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FBR net revenues
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Provincial deficit limits
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Tax refund arrears
8. Government’s Commitments to the IMF
Pakistani authorities have assured the IMF that:
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SOE legal reforms will be completed by August 2026
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Excise duty on fertiliser and pesticides will be imposed if revenue falls short
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No further deviations from tax-exemption commitments will occur
These commitments are crucial for Pakistan’s next IMF tranche.
Conclusion: A Tough but Necessary Road Ahead
The IMF’s latest reform agenda for Pakistan is ambitious, far-reaching, and demanding. If fully implemented, these benchmarks could significantly strengthen:
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Revenue sustainability
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Governance transparency
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Foreign exchange stability
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SOE efficiency
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Energy sector performance
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Investor confidence
However, achieving these reforms requires political will, administrative efficiency, and coordination across federal and provincial bodies. For Pakistan, the next 18–24 months will be critical in determining whether the country can break free from the cycle of economic instability—or remain dependent on bailout programs.