The IMF’s strict terms for releasing a $1 billion tranche to Pakistan have significant implications for the economy. The National Finance Commission (NFC) award formula will be reviewed, provincial government expenditures will be monitored, and reforms to reduce electricity prices and improve the energy sector are underway.
Under the new terms, there will be no relief on electricity prices, support prices for food grains will not be set by the government, and the federal government structure will see a reduction. The energy sector subsidies will be capped at one percent of GDP, and tax reforms will bring agriculture, property, and retail sectors under the tax net.
The IMF’s $7 billion bailout package for Pakistan will span 37 months, with the first installment expected by September 30. These measures aim to relieve pressure from external payments and set Pakistan on a path towards economic stability.