IMF Sets New Conditions for Pakistan's Financial Assistance Amid Rising Tensions

New IMF Conditions for Pakistan
The International Monetary Fund (IMF) has introduced 11 additional conditions for Pakistan to fulfill in order to receive the next tranche of its bailout program, as reported by a local media outlet on Sunday.
This brings the total number of conditions to 50.
In a report released on Saturday, the IMF cautioned that ongoing tensions between India and Pakistan could jeopardize the fiscal, external, and reform objectives of the financial program.
On May 9, the IMF approved a new $1 billion financial assistance package for Pakistan as part of its bailout initiative.
The latest conditions require Pakistan to obtain parliamentary approval for a new budget of $62.2 billion, increase the debt servicing surcharge on electricity bills, and lift restrictions on importing used cars older than three years.
These conditions are linked to a lending amounting to $7 billion, according to the report.
Securing parliamentary approval for the 2025-2026 budget aligns with the IMF's agreement to meet program targets by the end of June.
Additionally, the Pakistani government is required to publish a governance action plan based on the IMF’s Governance Diagnostic Assessment recommendations.
The IMF's report estimates the defense budget for the upcoming fiscal year at $8.5 billion, although Islamabad has indicated an 18% increase in defense spending due to heightened military tensions with India.
These tensions escalated on May 7 when the Indian military conducted strikes, dubbed Operation Sindoor, targeting what it claimed were terrorist camps in Pakistan and Pakistan-occupied Kashmir.
The strikes were a response to a terror attack in Jammu and Kashmir’s Pahalgam.
In retaliation, the Pakistan Army shelled Indian villages along the Line of Control, resulting in casualties among both civilians and defense personnel.
On May 10, both nations reached an agreement to cease hostilities following four days of conflict.
The IMF noted that despite the rising tensions, the market reaction has been relatively subdued, with the Pakistani stock market maintaining most of its recent gains.
On May 9, India expressed concerns regarding the effectiveness of the IMF's programs for Pakistan, citing a history of poor performance and the potential misuse of funds for cross-border terrorism.
India's Defence Minister remarked that any financial aid from the IMF to Pakistan could be viewed as funding for terrorism and should be reconsidered.