ISLAMABAD (MNN); After failing to meet 11 performance indicators under the IMF’s Extended Fund Facility (EFF), Pakistan has committed to 11 new targets involving fresh tax measures and expenditure cuts starting early next month. These steps aim to address growing revenue shortfalls and keep the $7bn IMF programme on track.
Fresh IMF documents released on Thursday show that Pakistan’s commitment to revised structural benchmarks — along with completion of two prior actions — paved the way for a staff-level agreement on the second review of the EFF and IMF Executive Board approval for a $1.2bn disbursement.
The government acknowledged a Rs104bn shortfall due to weaker-than-expected captive power levy collections, which it plans to offset by reducing power subsidies through lower-than-budgeted circular debt accumulation.
The Federal Board of Revenue has already fallen short of its target by nearly Rs430bn in the first five months of FY26.
Finance Minister Muhammad Aurangzeb informed the IMF that if FBR revenues continue to lag in the second quarter, the government will increase federal excise duty on fertilisers and pesticides by five percentage points, introduce excise duty on high-value sugary products, and shift items from the 8th GST schedule to the standard GST rate — implying an 18 percent tax.
He also assured the Fund that any revenue losses arising from the National Tariff Policy would be matched by delaying equivalent expenditures until the final quarter of FY26.
Pakistan has requested waivers on several missed performance criteria and structural benchmarks. The IMF documents show that publication of a governance and corruption assessment report was required as a prior action for the latest $1.2bn disbursement. Another prior action involved steps to recapitalise a weak commercial bank.
Overall, Pakistan missed one of six qualitative performance criteria, five structural benchmarks and four indicative targets — though some were met after extensions.
Waivers have been sought for failure to meet the end-June BISP spending target and modifications to three end-December performance criteria, including the primary budget deficit ceiling, the floor for new tax return filings and targeted BISP cash transfers.
The government has agreed to complete all steps needed for the FBR to implement three priority reforms by March 2026, including subordinate legislation, staff deployment and initial KPI reporting.
By June 2026, an initial assessment will be published on the costs and effectiveness of incentives for Special Economic Zones and Export Processing Zones, with all such incentives to be phased out by 2035.
A Tax Policy Office has been established and will publish a medium-term tax reform strategy by December 2026. Provinces have pledged to fully operationalise agriculture income taxation and ensure GST coverage on all services except a few exempted categories.
Pakistan will also assess weaknesses in the local currency bond market and publish a detailed action plan by September 2026. The SBP will study remittance costs by May 2026 to improve cross-border payments and shift more activity to formal channels.
The authorities will also work on deepening the foreign exchange market, enhancing exchange rate flexibility and strengthening external sustainability.
In the power sector, the government aims to complete the first bidding round for privatisation of three distribution companies in early 2026 and finalise prerequisites for privatising Hesco and Sepco by December 2026. Plans also include advancing Gencos’ privatisation, restructuring transmission networks and launching a wholesale electricity market.
The government is preparing to publish asset declarations of senior federal officials by December 2026, with provincial officials and banks’ access to declarations included under the revised framework.
NAB will lead risk-based anti-corruption plans across the 10 most vulnerable agencies by October 2026.
Amendments to most SOE laws will be submitted to parliament by August 2026. The government also plans to amend the Sovereign Wealth Fund law by March 2026 to ensure transparency and fiscal safeguards before operationalising the fund.
