IMF seeks progress on NFC process in ongoing review of Pakistan’s economic framework

The International Monetary Fund (IMF) on Tuesday emphasised the need for progress in streamlining the National Finance Commission (NFC) process, a critical element in the resource-distribution framework between Pakistan’s federal and provincial governments, according to a news report. 

The discussions took place during the ongoing second review of the $7 billion Extended Fund Facility (EFF) and the first review of the Resilience and Sustainability Facility (RSF), which are essential for Pakistan’s financial stability. 

The review sessions, held at a local hotel, covered a broad array of macroeconomic and fiscal issues, with special attention on the economic repercussions of the recent floods and their potential impact on growth and inflation.

Key issues discussed included the streamlining of the NFC process, which remains a key point of contention in the allocation of resources. The IMF’s team also raised concerns regarding the government’s efforts in tackling anti-money laundering (AML) risks, particularly focusing on trade-based money laundering. 

The review emphasised the need for stronger risk-based supervision and a comprehensive analysis of the impacts of trade-linked laundering on Pakistan’s economic stability.

Other discussions included updates on the e-PADS procurement system, the progress of external audits, and the oversight of non-financial businesses and professions. A focus was also placed on strengthening Pakistan’s adherence to international standards, especially regarding the beneficial ownership registry.

The IMF team was updated on the government’s fiscal framework for fiscal year 2025, including flood-related spending, delegation of financial authority, and measures to ensure that health and education allocations are not compromised. Additionally, officials discussed the use of structural cash surpluses to address fiscal shortfalls.

The IMF reviewed macroeconomic data, including developments in key sectors and the effects of the floods, as well as progress on major surveys like the Labour Force Survey (LFS) and Household Integrated Economic Survey (HIES). Discussions also included fiscal outlooks for fiscal year 2026 and inflation projections.

According to Finance Ministry officials, the primary objective of the discussions was to align Pakistan’s economic priorities with IMF program targets while factoring in the challenges posed by recent flood-related disruptions. The IMF mission will continue its engagements with relevant ministries before finalizing its review.

A successful review will allow the disbursement of approximately $1 billion under the EFF program, a crucial step toward stabilizing Pakistan’s external financing and macroeconomic conditions.