IMF Imposes 11 New Anti-Corruption Conditions on Pakistan's $7 Billion Bailout Program

Pakistan's 37-month Extended Fund Facility (EFF) program, approved in September 2024, is facing increased scrutiny as the International Monetary Fund imposes additional conditions.

The IMF has recently introduced 11 new conditions on Pakistan under its $7 billion bailout program specifically targeting corruption issues. These additional requirements have increased the total compliance measures to 64 over an 18-month period, according to the Fund's staff-level report for the second review.

This development comes after the IMF expressed significant concerns regarding Pakistan's economic management and reform implementation record. Despite these concerns, the Fund has approved fresh disbursements totaling approximately $1.2 billion under its support programs, while warning of risks stemming from policy implementation failures, institutional weaknesses, and ongoing structural vulnerabilities.

According to the IMF's report, an immediate disbursement of about $1 billion under Pakistan's EFF and roughly $200 million through the Resilience and Sustainability Facility (RSF) has been approved. However, this approval included a "request for a waiver of nonobservance of a performance criterion," highlighting persistent gaps in Pakistan's adherence to program commitments.

The IMF acknowledged that Pakistan's authorities have demonstrated "strong program implementation," but emphasized that the economy remains vulnerable to substantial risks and requires continued discipline to prevent regression. The Fund stated, "Policy priorities remain centered on maintaining macroeconomic stability and advancing reforms to strengthen public finances, enhance competition, raise productivity and competitiveness, bolster the social safety net and human capital, reform SOEs, and improve public service provision and energy sector viability."

References to state-owned enterprises (SOEs) and energy sector challenges reflect longstanding IMF concerns about chronic losses, inefficiencies, and fiscal drains that have repeatedly undermined Pakistan's economic stabilization efforts.

The IMF highlighted in its staff report that program monitoring depends on detailed and continuous reporting from Pakistani authorities, including the State Bank of Pakistan, the Ministry of Finance, and other agencies. The Fund warned that "any non-observance of continuous PCs" must be promptly reported.

Pakistan's debt situation remains concerning, with the IMF drawing attention to the country's substantial debt burden and dependence on external financing. The report indicates total public debt exceeding $307 billion, with external debt representing more than one-third of this amount, and IMF obligations constituting a significant portion of multilateral liabilities.

While acknowledging progress, the Fund emphasized that economic gains remain fragile. "Fiscal performance has been strong, with a primary surplus of 1.3 percent of GDP achieved in FY25, in line with targets," the IMF noted, but added that inflation had increased, "reflecting the impact of the floods on food prices," and household financial pressures remain severe.

The IMF stressed Pakistan's economic recovery vulnerability to shocks and policy reversals, particularly within a challenging global environment. The Fund stated, "Continued strong policy implementation has helped Pakistan weather several shocks this year," but cautioned that "the recent floods moderately dampen the outlook for FY26."

Climate resilience reforms were identified as urgent by the IMF, which warned that Pakistan's repeated exposure to natural disasters presents long-term economic risks. "The recent floods highlight the urgency of moving swiftly on climate-related reforms to build resilience to the frequent natural disasters that Pakistan faces," the IMF stated, noting that progress in this area is being supported by the RSF.

Despite rebuilding foreign exchange reserves to $14.5 billion by the end of FY25, up from $9.4 billion a year earlier, the IMF indicated that reserves still require strengthening over the medium term through careful macroeconomic management.

Pakistan has sought IMF assistance more than 20 times since the late 1980s, reflecting persistent balance-of-payments problems, narrow tax bases, and governance weaknesses.

For India and neighboring countries, the IMF's assessment reinforces concerns about Pakistan's recurring reliance on international bailouts, weak reform implementation, and structural economic vulnerabilities, which impact regional stability and growth. India has consistently advocated in international forums that repeated bailouts without significant structural changes have failed to deliver sustainable stability.

Pakistan's current 37-month EFF was approved in September 2024, while the 28-month RSF was approved in May 2025. Together, these programs aim to stabilize Pakistan's economy, restore confidence, and support reforms, but the IMF's latest review clearly indicates that sustained compliance and reform momentum remain critical.

The IMF's recent warnings underscore that, despite additional funding, Pakistan's economic challenges are far from resolved, and continued scrutiny will remain essential to future program reviews.