Have 11 New Conditions Been Imposed on Pakistan by the IMF Amid Rising India-Pakistan Tensions?

New Delhi, May 18 (NationPress) The International Monetary Fund (IMF) has placed 11 additional conditions on Pakistan for the $7 billion lifeline it has provided, highlighting the escalating tensions with India as a significant risk for the economically challenged nation.

Among the newly established stipulations is the approval of a fresh budget amounting to Rs 17.6 lakh crore, an increase in debt servicing surcharges on electricity bills, and the removal of restrictions on importing used cars older than three years, as reported by the Pakistani newspaper Express Tribune.

The Staff Level report issued by the IMF on Saturday stated that ongoing tensions between India and Pakistan, if they persist or worsen, could jeopardize the fiscal, external, and reform objectives of the program.

The report further pointed out that tensions have notably escalated between Pakistan and India over the past fortnight, yet market reactions have been relatively muted, with the stock market maintaining most of its recent gains and spreads widening only slightly.

The IMF has projected Pakistan's defense budget for the upcoming fiscal year at Rs 2.414 lakh crore, marking an increase of Rs 25,200 crore or 12 percent. In contrast to the IMF's estimates, the government has proposed an allocation exceeding Rs 2.5 lakh crore, reflecting an 18 percent increase following the conflict with India.

Additionally, the IMF has mandated that Pakistan obtain parliamentary approval for the fiscal year 2026 budget to align with the IMF staff agreement and achieve program targets by the end of June 2025.

As stated by the Express Tribune, the IMF has now imposed a total of 50 conditions on Pakistan for a mere $7 billion in lending.

The IMF's report has indicated that the overall size of the federal budget will be Rs 17.6 trillion, including Rs 1.07 lakh crore earmarked for development spending, resulting in a total deficit of Rs 6.6 lakh crore.

A new stipulation has also been set for the provinces, requiring the four federating units to implement the new Agriculture Income Tax laws via a comprehensive plan that includes creating an operational platform for processing returns, taxpayer identification, a communication campaign, and a compliance improvement strategy. The deadline for implementation is June of this year.

According to the third new requirement, the government must publish a governance action plan based on recommendations from the Governance Diagnostic Assessment by the IMF, aiming to publicly identify reform measures addressing critical governance vulnerabilities.

The fourth new condition mandates that the government provide annual inflation adjustments to the unconditional cash transfer program to safeguard citizens' real purchasing power.

Another stipulation requires the government to develop and publish a strategy outlining the financial sector's direction post-2027, detailing the institutional and regulatory landscape from 2028 onward.

In the energy sector, four new conditions have been introduced. The government must issue notifications for annual electricity tariff adjustments by July 1st this year, ensuring energy tariffs align with cost recovery levels.

It will also need to notify semi-annual gas tariff adjustments by February 15, 2026, to maintain tariffs at cost recovery levels, according to the report.

Parliament is expected to legislate to make the captive power levy ordinance permanent by the end of this month. The government is increasing industry costs to encourage a shift to the national electricity grid.