Pakistan plans to secure the full $1.7 billion World Bank financing package despite slow progress in implementing economic reforms and concerns over repeated violations of key conditions attached to the programme.
The financing initiative, known as the Public Resources for Inclusive Development (PRID), aims to expand Pakistan’s tax base, improve public expenditure management, strengthen provincial revenue collection and align government spending with constitutional responsibilities.
The programme is being implemented under the World Bank’s Multiphase Programmatic Approach (MPA), which provides financing through multiple phases involving the federal government and all four provinces.
According to the World Bank’s official announcement on Pakistan’s fiscal reform programme, the initiative is designed to improve domestic revenue mobilisation, strengthen budget management and enhance public service delivery through better use of data and digital systems.
However, Pakistan’s commitment to the agreed reforms has come under scrutiny after the government increased taxes on imports twice, despite its obligation to implement the National Tariff Policy under the financing arrangement.
The latest move came last month when the Economic Coordination Committee (ECC) approved additional customs duties to protect a domestic tyre manufacturer. A similar decision had been taken in June, raising questions about the government’s commitment to trade liberalisation.
World Bank Flags Delays in Pakistan’s Economic Reforms
The first phase of the $1.7 billion programme involves $700 million in financing, including a $600 million operation for the federal government and $100 million for Sindh.
The World Bank has rated implementation of the federal government’s $600 million operation as moderately satisfactory in its last two assessments, although delays and implementation risks remain.
In its October 2026 Implementation Status and Results Report, the lender maintained the moderately satisfactory rating while acknowledging progress after the operation became effective on May 14, 2026.
Pakistan received an advance disbursement of approximately $164.5 million on June 29, 2026.
The federal operation had initially been approved by the World Bank’s board on December 19, 2025, but was not yet effective when the lender issued its April assessment.
The next $200 million financing operation is being processed for Khyber Pakhtunkhwa, while Balochistan and Punjab are expected to receive funding under the third and fourth phases.
Sindh’s $100 million component is intended to demonstrate how provincial governments can implement fiscal reforms under the National Fiscal Pact, particularly in agricultural income taxation and property tax collection.
Despite the implementation challenges, government officials have indicated that Pakistan intends to continue with the financing programme rather than abandon the remaining phases.
National Fiscal Pact Raises Questions Over Federal Spending
Another major challenge concerns Pakistan’s implementation of the National Fiscal Pact, which aims to redistribute financial responsibilities between federal and provincial governments in line with the Constitution.
Under the agreement, the federal government is expected to reduce spending on projects and functions that were transferred to provincial governments under the 18th Amendment.
However, the approval of Rs. 87 billion for a project in Sindh in June 2026 has raised questions about compliance with these commitments.
The World Bank has emphasised the importance of improving fiscal federalism by aligning government spending with constitutional responsibilities and strengthening provincial revenue generation.
In its July 2026 report, Strengthening Fiscal Federalism in Pakistan, the lender highlighted structural weaknesses in federal-provincial financial arrangements and the need to improve revenue mobilisation and public expenditure management.
The report also identified agricultural income taxation, property taxation and a new National Finance Commission (NFC) Award as important areas for strengthening Pakistan’s fiscal framework.
Other proposed structural reforms include trade liberalisation, power sector restructuring, greater private sector participation in state-owned enterprises and improvements in social service delivery.
Three Major Areas of World Bank Support for Pakistan
The $1.7 billion financing programme has three principal objectives: increasing tax revenues, improving the efficiency of public expenditure and strengthening national data systems for fiscal management and public service delivery.
1. Expanding Pakistan’s Tax Base and Provincial Revenue
The first component focuses on broadening Pakistan’s tax base and improving revenue collection at federal and provincial levels.
The World Bank will support improvements in tax policy and administration, with particular attention to underutilised provincial revenue sources.
Key initiatives include:
- Agricultural income tax: Developing reliable data systems to improve the identification and taxation of agricultural income.
- Property taxation: Digitising land records and standardising property valuation methods to strengthen tax collection.
- Provincial revenue mobilisation: Identifying additional revenue sources to reduce dependence on federal transfers.
- General Sales Tax on Services: Improving provincial tax collection through digital integration and better information sharing.
These reforms are intended to increase domestic revenue generation, improve tax fairness and reduce the government’s reliance on borrowing.
2. Reducing Government Spending and Improving Public Financial Management
The second component aims to improve public expenditure management by eliminating unnecessary spending and directing government resources towards priority sectors.
The programme includes reviews of government departments, administrative structures and spending procedures to identify opportunities for greater efficiency.
Major reform areas include:
- Government restructuring: Reviewing administrative operations to reduce inefficiencies and improve institutional performance.
- Federal expenditure reduction: Cutting spending on responsibilities constitutionally assigned to provincial governments.
- Electricity subsidies: Developing a welfare-based subsidy system to ensure residential electricity assistance reaches eligible consumers.
- Budget management: Expanding the Integrated Financial Management Information System (IFMIS) to improve budget planning and monitoring.
- Electronic procurement: Strengthening e-procurement systems to improve transparency, accountability and oversight of public funds.
Provincial governments will also receive support to improve budget allocation and spending efficiency, particularly in areas linked to human development and essential public services.
3. Strengthening Pakistan’s Data and Statistical Infrastructure
The third component focuses on improving the country’s statistical systems and making reliable information more accessible for government policymaking.
The Pakistan Bureau of Statistics (PBS) will be a key institution in this reform process.
The programme envisages improvements in the bureau’s governance through the establishment of a Governing Council and a Users’ Council.
It also includes plans for a National Data and Statistics Hub to facilitate information sharing between federal and provincial statistical organisations and other public institutions.
The initiative is expected to improve the quality of economic data, strengthen fiscal planning and help authorities assess the performance of public sector reforms.
More information about Pakistan’s national statistical system is available through the Pakistan Bureau of Statistics.
Pakistan’s Remaining World Bank Financing Depends on Reform Progress
Pakistan’s ability to secure the remaining World Bank financing will depend on its progress in implementing agreed economic reforms and meeting the programme’s conditions.
The initiative represents a broader effort to address structural weaknesses in Pakistan’s public finances, including a narrow tax base, inefficient government spending and overlapping responsibilities between federal and provincial administrations.
However, concerns over import duties and federal expenditure on provincial responsibilities highlight the difficulties involved in implementing the agreed fiscal reforms.
The World Bank programme seeks to strengthen Pakistan’s economic management by improving tax collection, controlling public expenditure and making government institutions more accountable.
Whether Pakistan can secure the full financing package will ultimately depend on its ability to translate reform commitments into measurable improvements in revenue collection, fiscal discipline and public service delivery.
