The federal government has intensified pressure on provinces to accelerate the implementation of International Monetary Fund (IMF) reforms and fiscal commitments ahead of the crucial second review of Pakistan’s $7 billion Extended Fund Facility (EFF) scheduled for completion by this weekend. The move underscores growing concern within Islamabad that delays at the provincial level could jeopardize the government’s efforts to secure the next tranche of the IMF program.
According to officials familiar with the matter, the Prime Minister’s Office (PMO) contacted senior federal representatives stationed in provincial capitals on Sunday night, directing them to assist local administrations in expediting pending IMF-related actions and development targets. The directive extends not only to commitments under the EFF but also to the climate-focused $1.4 billion Resilience and Sustainability Facility (RSF), both critical for stabilizing Pakistan’s economy and sustaining foreign inflows.
Provincial chief secretaries and finance secretaries were instructed to provide implementation updates within 24 hours, detailing reasons for any delays or unmet targets. Sources revealed that the Ministry of Finance had expressed frustration over what it described as a lack of cooperation from larger provinces, particularly Sindh and Punjab, in aligning with IMF fiscal obligations.
Sindh and Punjab have already missed their cash surplus targets for the fiscal period ending June 30, undermining the collective fiscal discipline required under the IMF program. Sindh’s latest budget includes a deficit of nearly Rs 40 billion, while Punjab has voiced discomfort over IMF-imposed conditions, arguing that these measures challenge provincial autonomy — particularly regarding flood-related relief spending.
The PMO has instructed provincial bureaucracies to submit updated fiscal reports to the Ministry of Finance, as the IMF continues to scrutinize Pakistan’s compliance ahead of the upcoming review. Fund officials have reportedly withheld disbursements for development schemes in flood-affected areas until detailed needs assessments are completed. The IMF has also reiterated that humanitarian and reconstruction spending cannot come at the expense of fiscal discipline or cash surplus targets agreed under the national fiscal pact.
Under this fiscal framework, Punjab is required to contribute Rs 740 billion in cash surplus to the federal government in FY26, Sindh Rs 370 billion, Khyber Pakhtunkhwa Rs 220 billion, and Balochistan Rs 185 billion. These commitments are pivotal to meeting the IMF’s primary budget surplus requirements, a key benchmark for ongoing financial assistance.
The review comes as Islamabad and the IMF deliberate potential revisions to Pakistan’s macroeconomic forecasts following flood-induced losses. Official sources indicate that the country’s GDP growth target may be adjusted downward to 3.5% from 4.2%, while inflation is now expected to exceed 8%, up from the budgeted 7%. These shifts are expected to cascade through revenue collection, trade balances, and overall fiscal planning.
Provinces also face structural reform deadlines tied to the IMF’s broader fiscal modernization agenda. These include harmonizing agricultural income tax regimes with federal standards, transitioning goods and services tax (GST) on services to a negative list framework effective FY26, and implementing capital-based property taxes. Many of these commitments have already missed their initial deadlines, raising concerns about administrative preparedness.
Under the RSF, provinces are also tasked with advancing climate resilience initiatives, improving water management, and digitizing land and revenue records — particularly in Sindh and Punjab. These reforms are designed to enhance transparency and disaster response capabilities, but progress has been slow.
All provinces have pledged not to introduce policies that contradict or undermine Pakistan’s commitments under the IMF’s Memorandum of Economic and Financial Policies (MEFP). The federal government, in turn, assured the IMF that any provincial policy changes potentially affecting program goals would be communicated in advance through the Ministry of Finance.
As Pakistan’s economic team works to finalize the review this week, the spotlight remains firmly on provincial compliance. Failure to meet fiscal and reform benchmarks could delay critical funding, intensify pressure on the rupee, and disrupt the fragile economic stability Islamabad has worked to restore.
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