The federal government has stepped up pressure on provincial administrations after several key commitments under the International Monetary Fund (IMF) programme were found to be lagging, raising concerns about the smooth completion of the ongoing second review of the $7 billion Extended Fund Facility (EFF).
According to officials, the Prime Minister’s Office (PMO) has asked provincial governments to immediately resolve outstanding issues tied to fiscal targets, especially those related to budget surpluses and tax reforms, which are central to Pakistan’s agreement with the IMF.
Sources said the PMO reached out to senior federal officers stationed in provincial capitals, directing them to coordinate with local bureaucracies and ensure progress on pending IMF benchmarks under both the EFF and the $1.4bn Resilience and Sustainability Facility (RSF).
The move came after the Finance Ministry informed the PMO that Sindh and Punjab had missed their agreed surplus targets for FY25 and were showing slow progress in the current fiscal year. Sindh’s budget carries a deficit of around Rs40 billion, while Punjab has voiced reservations over strict IMF terms, citing political and humanitarian considerations in flood-hit areas.
Officials warned that these lapses could complicate talks with the IMF, which has demanded that flood-related expenditures should not undermine fiscal discipline. Under the national fiscal framework, Punjab must provide a Rs740bn surplus, Sindh Rs370bn, KP Rs220bn, and Balochistan Rs185bn to the Centre.
The IMF has also insisted on strict compliance with structural reforms, including the alignment of agricultural income tax with federal laws, transition of GST on services to a negative list by FY26, and the introduction of capital-based property tax systems.
Insiders said the IMF has linked continued cooperation with Pakistan to provincial performance, particularly in implementing climate and agriculture-related commitments under the RSF. These reforms aim to improve water management, digitize land records, and enhance resilience against climate shocks — areas where progress has remained slow.
The Centre has reminded all provinces that under the Memorandum of Economic and Financial Policies (MEFP), no province may introduce any new measure that contradicts or undermines IMF commitments. Any modification must first be cleared with the Ministry of Finance.
As Pakistan races to meet IMF conditions ahead of the review deadline this weekend, officials fear that weak provincial compliance could jeopardize the disbursement of critical funds needed to stabilize the economy and sustain the reform momentum.
