The International Monetary Fund (IMF) has raised its loan requirements for Pakistan as the country continues to face financial struggles and growing political risks. In a recent report, the IMF detailed new steps Pakistan must take before it can access more funds. These include passing the federal budget by June, reforming agricultural income taxes in all provinces, and phasing out tax incentives for industries before the end of the year.
The IMF also urged Pakistan to make regular adjustments to electricity and gas prices. These changes are needed to cover the real cost of energy and help fix problems in the power sector. Currently, prices are too low, which causes financial losses for energy companies and increases the government’s financial burden. The IMF also wants Pakistan to pass new laws to restructure the growing debt of energy firms. This would reduce stress on public finances and attract more investment into the energy market.
Despite avoiding a default in 2023, Pakistan’s economic recovery remains fragile. The country still faces high interest payments and uncertainty from global trade tensions. The IMF estimates that Pakistan will need over $100 billion in external funding through 2029. Meeting this need will depend on the success of reforms and the country’s ability to manage its spending and revenue.
Earlier this month, the IMF released $1 billion from a $7 billion loan deal signed in 2023. It also approved a new $1.4 billion loan aimed at improving Pakistan’s climate resilience. These funds are critical for supporting the country’s foreign exchange reserves and economic stability. The approval came despite opposition from India, which raised concerns after recent cross-border conflicts in Kashmir.
The IMF warned that rising tensions with India could put Pakistan’s fiscal and economic goals at risk. The two countries have a long history of disputes, especially over the Kashmir region. On May 10, both sides agreed to a ceasefire after military strikes pushed them to the brink of open conflict. While the situation has eased, any future clashes could weaken investor confidence and slow down needed reforms.
The IMF also highlighted the importance of transparency and fairness in the use of its funds. It warned that any misuse or perception of bias could damage Pakistan’s credibility and limit future support. To maintain trust and stability, Pakistan will need to show clear progress in managing its economy and meeting reform goals.
Pakistan now faces tough decisions. To unlock more IMF funds, it must raise taxes, remove special breaks for businesses, and reduce spending. It must also reform the energy sector and improve revenue collection. These steps are not easy, but they are needed to stabilize the economy and prevent another crisis.
