Provinces to meet IMF goals
Provinces to meet IMF goals: The federal government has asked provincial governments to quickly fix issues related to the IMF loan program. These issues need to be resolved to complete talks for the $7 billion Extended Fund Facility (EFF) by the weekend. On Sunday night, the Prime Minister’s Office (PMO) contacted federal officers in the provinces. They were told to help push forward progress on pending targets promised to the IMF. These targets are part of both the main loan program and a separate $1.4 billion climate fund.
Provincial Budget Misses
The PMO ordered provincial chief secretaries and finance secretaries to report back within 24 hours. They must explain any missed goals. The Finance Ministry told the PMO that provinces—especially Sindh and Punjab—have not been cooperating well. Both missed their targets for saving cash by June 30. They are also off-track in the current financial year. Sindh announced a budget deficit of Rs40 billion. Punjab has raised concerns about strict IMF conditions, even for flood aid.
The PMO also told the provincial bureaucracy to share progress reports with the Finance Ministry. Meanwhile, the IMF has asked the government to stop development spending in flood-hit areas until proper damage reports are ready. The IMF wants both federal and provincial governments to spend money carefully. It has warned that provinces must not reduce their promised cash savings, even for flood support.
Rising Inflation Risks
For the 2025–26 financial year, the provinces must meet the following cash surplus targets: Punjab Rs740 billion, Sindh Rs370 billion, KP Rs220 billion, and Balochistan Rs185 billion. These savings are essential to meet the IMF’s demand for a budget surplus.
The IMF and federal government are also discussing changes to economic targets. Due to flood damage, GDP growth may drop to 3.5% from 4.2%, and inflation may rise above 8%, compared to the budgeted 7%. These changes could affect tax revenue, imports, exports, and the overall economy.
Agriculture Tax Shortfall
The provinces had agreed to align their agriculture income tax laws with federal laws. However, they failed to collect enough tax by the September 30 deadline, which was linked to an important IMF condition. They also agreed to switch to a “negative list” for taxing services and to adopt a property tax based on property location starting in FY26.
The provinces also promised to carry out reforms under the $1.4 billion climate program. These include improving water systems, disaster response, and digital land records—especially in Sindh and Punjab. So far, they have not met those deadlines.
No Solo Decisions
Finally, all provinces had agreed not to take any actions that go against the IMF program. They also promised to consult the IMF, through the Finance Ministry, before making any decisions that could impact the agreement.
Published in Dawn, 7th October, 2025
