The International Monetary Fund (IMF) has added 11 new conditions to Pakistan's ongoing $7 billion Extended Fund Facility (EFF) programme, deepening the financial pressure on an economy already struggling with depleted reserves, high interest rates, and a sudden withdrawal of foreign deposits. The development was reported by Business Recorder, citing the latest review documentation.

Key New Conditions Imposed

Among the most significant new requirements is the enactment of amendments to the Special Economic Zones (SEZ) Act and the Special Technology Zones Authority Act. The IMF wants Pakistan to phase out existing fiscal incentives and shift from profit-based to cost-based incentives — a structural overhaul that critics say will unsettle investor expectations built over years.

Business Recorder flagged a particularly contentious detail: the government reportedly intends to lease 6,000 acres in Karachi to SEZ developers without charge. "What was extremely disturbing was the report that the government intends to give 6000 acres in Karachi on lease to developers of SEZs without charge," the publication noted.

The October 2024 IMF documents on the EFF approval had already observed that Pakistan's tax system had been "extensively used to provide non-transparent support through exemptions for privileged sectors like real estate, agriculture, manufacturing, and energy, as well as through the proliferation of Special Economic Zones." The earlier condition stipulated that existing SEZs would be phased out over a decade, with no new zones permitted.

Transparency and Procurement Reforms

A second new condition requires Pakistan to establish a regulatory registry to improve the business climate. This mirrors a pledge made in the October 2024 EFF documents, in which Islamabad committed to ensuring "the highest level of transparency in all public procurement at the federal and provincial levels" through the electronic Pakistan Acquisition and Disposal System (e-PADS), set up with technical assistance from the World Bank.

UAE Deposit Withdrawal Adds to Pressure

Pakistan's fragile economic footing has come into sharper focus amid shifting geopolitical dynamics. According to a report by Dawn, the United Arab Emirates withdrew $3.5 billion in deposits, creating immediate pressure on Pakistan's foreign exchange reserves. The withdrawal exposed the country's deep dependence on bilateral financial support to maintain reserve adequacy.

This comes amid a period when Islamabad was projecting itself as a diplomatic actor during heightened tensions linked to the US-Israel conflict with Iran — a contrast that analysts say underscores the disconnect between Pakistan's foreign policy ambitions and its domestic fiscal reality.

Structural Vulnerabilities Persist

Inflation has moderated in recent months, but high interest rates — maintained on IMF advice — have dampened investment and export competitiveness, reportedly trapping the economy in a prolonged low-growth cycle. Pakistan's external position remains particularly fragile, with reserves heavily reliant on multilateral disbursements and bilateral rollovers.

Notably, this is not the first time the IMF has expanded conditionality mid-programme; each successive review has added layers of structural benchmarks that successive Pakistani governments have struggled to implement without political cost.

With the next IMF review expected in the coming months, Islamabad's ability to meet the expanded set of conditions — while managing domestic political pressures and a restive business community — will be the defining test of whether the EFF programme stays on track.