IMF tranche tied to SOE reforms

Fund seeks amendments to govt companies' law for release of $1b

ISLAMABAD:

The International Monetary Fund (IMF) has proposed a prior action to amend state-owned enterprises (SOEs) laws for qualifying for the next $1 billion tranche, as the scheduled time for review talks ended on Wednesday.

Chairman of the Senate Standing Committee on Finance, Senator Saleem Mandviwalla, said that the committee will evaluate the laws and pass them if they are in the national interest.

The federal government had missed all the deadlines in the past to amend these laws, which the global lender has been pushing to make sure that the entities are governed in line with best international practices.

The government was reluctant to move swiftly on these laws despite the Finance Ministry itself disclosing this week that the public debt of SOEs, excluding contingent liabilities, soared to a record Rs10.1 trillion by December last year. This was 242% or Rs7.1 trillion higher than what was earlier reported by the central bank.

Government officials said that the IMF staff has proposed a prior action to amend the SOEs laws. If a staff-level agreement is achieved on this condition, the IMF will convene the board meeting to approve the next $1 billion loan tranche after parliament amends these laws, they added.

A senior PPP leader, Syed Naveed Qamar, said on Wednesday that all the legislation should only go through parliament.

Pakistan and the IMF held staff-level talks from September 23 to October 7. Till the filing of the story, the IMF did not issue a press statement about the outcome of the talks.

During scrutiny of the budget, the IMF has also objected to Rs180 billion out of the Rs853 billion statistical discrepancy. Sources said that the IMF wanted to adjust the Rs180 billion amount against the claimed primary budget surplus of the last fiscal year.

During review talks, the IMF aired concern over the delay in amendments after Pakistan missed the fourth deadline to bring 9 to 10 laws of SOEs in conformity with the main SOE law. During each staff-level review, the government failed to meet the deadline, and every time it sought a fresh date, the latest one was August 2026.

As a result, the IMF asked the Pakistani authorities to align the laws with the SOE Act before mid-November. Subject to the agreement, the IMF board could meet in late November to approve the next loan tranche of $1 billion under the Extended Fund Facility.

The IMF has already disbursed $4.2 billion out of the $7 billion package mainly due to progress on fiscal and monetary matters.

Pakistan had sent amendments to six laws for parliament's approval in January 2026. The report added that the government now needed to make progress on the remaining three SOEs with dedicated laws.

Secretary Finance Imdad Ullah Bosal told the National Assembly Standing Committee on Finance that the laws of Port Qasim Authority, Gwadar Port Authority, Karachi Port Trust, State Life Insurance Corporation, the National Bank of Pakistan, National Telecommunication Corporation and Pakistan Railways would be amended.

The IMF expressed concern over the delay in amendments to the Sovereign Wealth Act. The extended deadline was March 2026.

Sources said that the IMF has not yet accepted Pakistan's request for adjusting the increase in the monthly stipend of the Benazir Income Support Programme beneficiaries. Currently, two benchmarks - inflation and food expenses - are used for determining the annual increase.

Pakistani authorities have requested the IMF that the annual increase in stipend should only be linked with inflation and its benchmarking with consumption cost should be stopped. The proposal further added that the resultant saving of Rs30 billion should then be allowed to be used for conditional cash transfers under the BISP. This would ensure better targeting of beneficiaries.

The IMF also did not respond to a proposal to allow the existing Export Processing Zones to sell 20% of the total production in the domestic market. The government had proposed that the existing EPZs should be exempted from the condition, and the 100% export condition should only be applicable to the new EPZs.

The government on Thursday appointed Mariam Kayani – a Grade 20 officer in the finance ministry as new senior adviser to the executive director of the IMF for three years. She would replace Saif Dogar, who has completed the term and is now returning to Islamabad.

The IMF programme has so far helped improve fiscal and monetary numbers, and all the hard reforms, including in SOEs and broadening the tax base to traders, real estate and agriculture sectors, have failed.

The failure to bring meaningful reforms has also dented the IMF's reputation in Pakistan, as the brunt has been sustained only by the salaried class and the corporate sector.

The government has also violated the conditions of giving tax breaks, and it could not liberalise the sugar sector by breaking the monopoly of the sugar millers.

The World Bank reported this week that 48% of the poor in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region were living in Pakistan, and poverty increased due to a prolonged period of adjustment under the IMF programme.