$7-bn bailout: IMF slaps Pakistan with 11 conditions on tax, sugar and power sector reforms

The International Monetary Fund (IMF) has placed 11 new conditions on Pakistan under the second review of its $7 billion bailout programme, bringing the total to 64 within just 18 months. The newly released staff-level report outlines a series of governance, anti-corruption, fiscal and structural reforms aimed at addressing what the IMF calls “deep-rooted distortions” in Pakistan’s economy. 

Key conditions are 

• Asset declarations: Pakistan must publish asset declarations of high-level federal civil servants by December 2026, with provincial officials to follow. 
• Bank access: Banks will be allowed full access to these declarations to identify mismatches between income and assets. 
• High-risk departments: By October 2026, the government must release action plans for 10 high-risk departments based on corruption risk assessments. 
• NAB coordination: The National Accountability Bureau will coordinate the plans for the most vulnerable agencies. 
• Provincial empowerment: Provincial anti-corruption bodies will gain powers to receive financial intelligence and conduct investigations. 

These steps follow the IMF’s Governance and Corruption Diagnostic Assessment, which flagged major weaknesses across Pakistan’s legal and institutional frameworks. 

Crackdown on elite influence in sugar sector 

The IMF wants Pakistan to break entrenched elite influence over the sugar industry. By June 2026, Pakistan must: 

• Adopt a national policy for sugar market liberalisation. 
• Agree on reforms covering licensing, price controls, import/export permissions and zoning. 
• Publish a clear implementation timeline agreed by federal and provincial governments. 

Remittances & Financial sector reforms 

• Pakistan must complete an assessment of remittance costs and structural barriers to cross-border payments by May 2026, amid projections that remittance costs could hit $1.5 billion. 
• A separate study on bottlenecks in local currency bond market development must be finished by September 2026, followed by a strategic action plan. 

Tax machinery overhaul 

The Federal Board of Revenue’s persistent underperformance has triggered a fresh set of reforms. By December 2025, Pakistan must: 

• Finalise a detailed FBR reform roadmap outlining staffing needs, reform milestones, revenue impacts and KPIs. 
• Fully implement reforms in at least three priority areas, including required legislation and staffing changes. 
• Publish a medium-term tax reform strategy covering policy, administrative and legal reforms, supported by a resource plan by December 2026. 

Power sector & Corporate governance reforms 

To reduce chronic losses in the power sector, the IMF has directed Pakistan to: 

• Finalise conditions for private-sector participation in HESCO and SEPCO by December 2025. 
• Sign public service obligation (PSO) agreements with the seven largest entities before the next federal budget. 
• Submit amendments to the Companies Act, 2017 to modernise corporate governance and compliance for unlisted firms. 
• Publish a concept note for upcoming reforms to the Special Economic Zones (SEZ) Act. 

The addition of 11 new conditions signals that the IMF views Pakistan’s reform progress as uneven and insufficient, increasing the pressure on authorities ahead of future disbursements. Compliance with 64 conditions within a compressed timeline will test the government’s administrative capacity, political will, and ability to manage resistance from powerful interest groups — particularly in sensitive areas such as sugar sector liberalisation, tax reforms, and asset disclosures for civil servants.

Successful implementation would significantly strengthen Pakistan’s case for securing the remaining tranches of the current $7 billion programme and pave the way for negotiations on a successor, longer-term Extended Fund Facility (EFF) that Islamabad has been seeking and impact its future bailout requirements.