The International Monetary Fund (IMF) board has approved a $7 billion loan program for Pakistan, accompanied by strict conditions that the country must adhere to. According to Dawn News, while the approval has been granted, the IMF has imposed several rigorous requirements that Pakistan must fulfill.
One of the key conditions is that there will be no relief on electricity prices akin to what has been provided by the Punjab government in the past. Additionally, the determination of support prices for essential food commodities will not be allowed.
Furthermore, the agreement mandates a reduction in the federal government’s size and expenditures. Pakistan has also been instructed to review the formula for the National Finance Commission (NFC) Award.
Sources indicate that the IMF will monitor the expenditures of provincial governments, and discussions are ongoing between the federal and provincial governments regarding the National Finance Pact.
The IMF has stipulated that Pakistan must not provide subsidies exceeding 1% of GDP to the energy sector, and no supplementary grants will be disbursed during the loan program.
Additionally, the IMF has directed Pakistan to bring the agricultural sector into the tax net and has also imposed conditions to include the property and retail sectors in taxation.
In light of the need for reforms, the IMF has instructed the government to present a comprehensive package aimed at reducing electricity prices. Only after this will there be a review of power purchase agreements within the energy sector.
