The federal government has urged provincial administrations to urgently address pending issues tied to the International Monetary Fund (IMF) programme, as Islamabad seeks to finalize the second review of the $7 billion Extended Fund Facility (EFF) by the end of this week.
According to official sources, the Prime Minister’s Office (PMO) reached out to senior federal officers posted in provincial capitals, asking them to expedite coordination on IMF-related matters — both under the EFF and the $1.4bn Resilience and Sustainability Facility (RSF). Similar directives were issued to key federal ministries to ensure progress on agreed fiscal and structural benchmarks.
The provincial chief secretaries and finance secretaries were directed to submit updated compliance reports within 24 hours, including reasons for any unmet targets or delays. The Finance Ministry had earlier informed the PMO that larger provinces were lagging in meeting their fiscal commitments, particularly in providing budgetary cash surpluses.
Sources said Sindh and Punjab had missed their surplus targets for the fiscal year ending June 30 and were showing weak performance in the current year as well. Sindh has already presented a Rs40 billion deficit budget, while Punjab has voiced concerns over strict IMF conditions, even in matters related to flood recovery funds.
The IMF has reportedly cautioned that flood-related spending must not compromise fiscal discipline, insisting that committed provincial surpluses remain intact. Under the current fiscal arrangement, Punjab is required to contribute Rs740bn in cash surplus, followed by Rs370bn from Sindh, Rs220bn from Khyber Pakhtunkhwa, and Rs185bn from Balochistan.
Officials added that the IMF is also reviewing macroeconomic adjustments to account for recent flood damage, which may lead to a downward revision in Pakistan’s growth projection to 3.5% from the earlier target of 4.2%. Inflation estimates may also be revised upward to around 8%, up from the budgeted 7%, impacting revenue and external sector targets.
Under the national fiscal pact, provinces had agreed to align agricultural income tax regimes with federal income tax rules and to improve collection efficiency by the September 30 deadline, a key structural benchmark for the October review.
The IMF is also monitoring provincial progress on transitioning the sales tax on services to a negative list and moving toward capital-based property taxation, both slated for implementation in FY26.
Provinces have also been assigned responsibilities under the RSF reforms, focusing on water resilience, disaster response, and transparency through digitization of land and revenue records — areas where progress remains slow.
The PMO reminded provincial governments that under the Memorandum of Economic and Financial Policies (MEFP), no new measure or policy can be introduced that undermines Pakistan’s commitments to the IMF. Any proposed modification must first be cleared through the federal Ministry of Finance.
