A major breakthrough in Pakistan’s stalled International Monetary Fund (IMF) program was achieved this week as the Sindh Assembly unanimously passed the Sindh Agricultural Income Tax Act, 2025. The legislation, approved on Monday, fulfills a key IMF condition and is expected to unlock over $1 billion in the second tranche of the $7 billion loan program.

The passage of the bill came after months of delays, with the federal government struggling to convince Sindh to implement the law. According to reports from The Express Tribune, the federal government had been negotiating with Sindh for four months without success.

The impasse was finally resolved after behind-the-scenes efforts by President Asif Ali Zardari and Deputy Prime Minister Ishaq Dar, who brokered a deal to secure the Sindh Cabinet’s approval.

The new law aligns agricultural income tax with federal personal and corporate income tax regimes, as demanded by the IMF. It also introduces a progressive super tax on high-income landlords. Key provisions of the bill include:

• Exemptions: Agricultural income up to Rs. 600,000 annually will be tax-free.
• Tax Rates: Income exceeding Rs. 5.6 million annually will be taxed at a maximum rate of 45%.
• Super Tax: No super tax will apply to annual agricultural income up to Rs. 150 million, while a maximum super tax of 10% will be levied on income exceeding Rs. 500 million.
• Corporate Farming: Small companies will face a 20% tax rate on agricultural income, while large companies will be taxed at 29%.

The delay in passing the law had stalled Pakistan’s IMF program review, as the lender required provincial governments to align agricultural income tax policies with federal standards. After repeated attempts by the finance ministry to convince Sindh failed, Ishaq Dar met with Zardari to resolve the issue. This led to urgent discussions with Sindh Chief Minister Murad Ali Shah and Balochistan Chief Minister Sarfaraz Bugti, expediting the legislation.

Following the passage of the law, Finance Minister Muhammad Aurangzeb expressed optimism about securing a positive IMF review. He stated that the approval of the Sindh Agricultural Income Tax Act, 2025, fulfills a critical condition for the program and paves the way for the IMF to announce review dates. The finance ministry expects the IMF mission to arrive in Pakistan by late February or early March.