Pakistan has agreed to a wide-ranging set of new reforms under the International Monetary Fund’s Extended Fund Facility (EFF), including dismantling investment tax incentives, tightening fiscal discipline, and restructuring key governance and accountability systems ahead of the next federal budget.
The IMF has introduced 11 additional structural benchmarks requiring Pakistan to amend laws governing Special Economic Zones (SEZs) and Special Technology Zones. The reforms will gradually eliminate existing fiscal incentives and remove the authority of the Board of Investment, Board of Approval, and SEZ administrations to independently grant tax concessions.
Authorities will transition from profit-based incentives to cost-based support mechanisms, while all fiscal incentives for Special Technology Zones are scheduled to be phased out by 2035 as part of efforts to create a uniform and transparent investment framework.
Under programme commitments, the government will seek parliamentary approval of the FY2026-27 budget aligned with IMF targets, including maintaining an underlying primary surplus of 2 percent of GDP.
Tax administration reforms will centralize audit case selection through a Compliance Risk Management system using data analytics to identify high-risk taxpayers. Officials will also introduce a standardized audit manual and policy framework aimed at improving transparency and consistency in enforcement.
Governance measures include amendments to Public Procurement Regulatory Authority rules to end preferential treatment for state-owned enterprises in non-competitive government contracts, a move intended to promote fair competition in public procurement.
The programme further calls for strengthening institutional independence and transparency at the National Accountability Bureau through merit-based recruitment for senior leadership, publication of investigation and prosecution rules, and annual disclosure of corruption case statistics.
On social protection, Pakistan has committed to inflation-linked adjustments to cash transfers under the Benazir Income Support Programme’s Kafaalat initiative, alongside quarterly benefit reviews to shield vulnerable households from rising prices.
The State Bank of Pakistan will prepare a roadmap for gradual liberalization of the foreign exchange regime while safeguarding financial stability.
Energy sector reforms will continue with semi-annual gas tariff adjustments and annual electricity tariff revisions to maintain cost-recovery pricing between July 2026 and February 2027.
Additionally, authorities plan to establish a Pakistan Regulatory Registry to serve as a legally authoritative database of federal business regulations covering the Islamabad Capital Territory, aimed at improving regulatory clarity and investment confidence.
