The International Monetary Fund has asked Pakistan to put in place strict legal and fiscal safeguards before making its proposed Sovereign Wealth Fund fully operational, requiring amendments through Parliament as part of the reform process.

Under the proposed framework, the fund will be barred from borrowing, issuing guarantees or lending to public or private entities, according to officials familiar with the matter. It will also be restricted from participating in public-private partnership projects and from acquiring financial assets or receiving funds from state-owned enterprises or financial institutions.

Officials said the required amendments would be introduced as a structural benchmark under the IMF program after approval of the federal budget for FY 2026-27, underscoring the importance attached to the reform.

Pakistan has already submitted amendments related to state-owned enterprises to Parliament to bring them in line with the SOE Act, while legislation for the remaining entities is expected to be finalized by August 2026.

As part of the assurances given to the IMF, the government has committed to strict fiscal oversight of the fund. All revenues generated by the Sovereign Wealth Fund will flow directly to the government rather than being retained by the fund itself.

Any investment by the fund will be financed through allocations from the federal budget under the Public Finance Management Act 2019, limiting its financial autonomy and placing it under tighter state control. In practice, the fund will operate as a state-owned entity with the stated aim of attracting foreign investment, supporting strategic commercial ventures and generating returns in line with its mandate.

The move comes as the government presses ahead with broader reforms in the state-owned sector, including reviews of major entities such as the National Highway Authority, Pakistan Railways and Pakistan State Oil, while also advancing privatization plans for several public entities.

Officials said the new framework would require transparent and competitive processes for asset sales and investments, alongside stricter disclosure requirements, including beneficial ownership details, to bring governance standards closer to international norms.