IMF Asks Pakistan to Remove Development Projects from Budget

Islamabad, Apr 22 (PTI) The IMF has asked Pakistan to remove provincially-mandated development projects worth Pakistani Rs 1.1 trillion from its federal development budget, according to a media report on Tuesday.

The powers and responsibilities are well defined under the 18th amendment of the constitution and the international money lender urged the government to adhere to constitutional responsibilities.

The Express Tribune newspaper reported quoting sources that the federal government is expected to exclude 168 provincial development schemes from the upcoming budget, with the total cost amounting to Rs 1,100 billion, of which Rs 300 billion has already been spent.

The federal government traditionally allocated funds for provincial projects but the International Monetary Fund (IMF) directed that no further federal funding be allocated to these projects, which are considered the responsibility of provincial governments.

Completing the remaining work would require an estimated Rs 800 billion, which the IMF says should now be financed through provincial development budgets.

The demand reflects the IMF's broader push for fiscal discipline and clarity in federal-provincial expenditure responsibilities as Pakistan continues to negotiate economic reforms under its loan programme.

Pakistan's Finance Minister Muhammad Aurangzeb departed for New York earlier this week ahead of key engagements in Washington, where he is expected to raise the issue of rescheduling guaranteed debt with his Chinese counterpart.

The discussion is set to take place on the sidelines of the IMF's spring meetings.

According to government sources, Aurangzeb is also scheduled to meet with the IMF managing director and a senior official from the US Treasury Department during the visit, reported the paper.

Pakistan has been in the process of implementing a USD 7 billion loan programme approved by the fund last year. The government agreed while signing the agreement to undertake several reforms.

The federal government is expected to present the budget 2025-26 in June and the removal of the development projects falling in the provincial category of responsibilities means a major shift in empowering provinces to fully exercise powers and responsibilities given in the constitution.

Earlier this month, the IMF identified the politicisation of civil service, weak organisational accountability and excessive focus on short-term goals among the key shortcomings in Pakistan's governance, which contribute to broader governance weaknesses and increase vulnerability to corruption.

The observations were made following the conclusion of a 12-day visit by the IMF's legal mission, led by Joel Turkewitz, which was the second such visit in as many months.