Imposes 11 New Conditions Amid India’s Operation Sindoor and Rising Tensions News24 –
In a big move, the International Monetary Fund (IMF) has reportedly slapped 11 new conditions on Pakistan to unlock the next tranche of its bailout programme. This move aims to warn the country that escalating tensions with India could threaten the program’s fiscal, external, and reform targets. The key conditions include passing a Rs 17.6 trillion
Key Conditions
Key conditions include passing a Rs 17.6 trillion federal budget, a higher debt servicing surcharge on electricity bills, and removal of restrictions on importing used cars older than three years. The Express Tribune reported that the IMF’s staff level report flagged that “rising tensions between India and Pakistan, if sustained or deteriorate further, could heighten risks to the fiscal, external and reform goals of the programme”.
The report says that although tensions between Pakistan and India have risen a lot recently, the stock market has only reacted a little. It has mostly held on to its recent gains, and the gap between certain financial rates has grown just a bit. The warning comes in the wake of India’s ‘Operation Sindoor’ — a series of precision strikes carried out on May 7 in retaliation for the Pahalgam terror attack that killed 26 people. Pakistan responded with attempted drone and missile strikes, before both sides reached a ceasefire understanding on May 10.
How Much Did Pakistan Get?
The IMF has set Pakistan’s defence budget for 2025-26 at Rs 2.414 trillion, marking a 12% increase. However, the Pakistani government has indicated that the actual spending could be even higher, exceeding Rs 2.5 trillion—an 18% rise—due to the recent conflict with India. Along with this, the IMF has imposed new fiscal and reform-related conditions.
These include a requirement for Parliament to pass the 2026 budget in line with IMF targets by June 2025, the need for provinces to implement agricultural income tax systems and enforcement mechanisms by June this year, and the publication of a governance action plan based on the IMF’s Diagnostic Assessment to address systemic weaknesses. In the energy sector, four key conditions have been added, including the notification of annual electricity tariff revisions by July 1, 2025, and semi-annual adjustments to gas tariffs, with the first adjustment due by February 15, 2026. Permanent legislation to enforce the captive power levy ordinance by end-May. Removal of the Rs 3.21 per unit cap on the debt service surcharge by end-June.
IMF, World Bank, And Pakistan
The IMF and World Bank have repeatedly blamed flawed energy policies and poor governance for the persistent build-up of circular debt in Pakistan’s power sector. Additionally, the government is required to prepare a roadmap to phase out incentives for Special Technology Zones and industrial parks by 2035, with the report due by year-end. One consumer-oriented condition calls for legislation to lift import restrictions on used cars- initially for vehicles up to five years old- by July 2025. Currently, only cars up to three years old are allowed under Pakistan’s import rules.