In a new development, the International Monetary Fund (IMF) has introduced 11 additional conditions to Pakistan’s $7 billion Extended Fund Facility (EFF) program. One of the conditions involves amending the Special Economic Zones (SEZ) Act and the Special Technology Zones Authority Act to transition from profit-based to cost-based incentives.
According to a report, the government plans to lease 6000 acres in Karachi to SEZ developers without any charge, a move that has raised concerns. The IMF’s October 2024 documents highlighted the misuse of the tax system to provide opaque support to sectors like real estate, agriculture, and energy through exemptions and SEZ proliferation.
Under the new conditions, existing SEZs will be phased out over ten years, with no new SEZs allowed to be established. Additionally, Pakistan is required to establish a regulatory registry to enhance the business environment, as per the IMF directives.
Pakistan’s economic vulnerabilities have been underscored amidst evolving geopolitical and financial landscapes, despite its efforts to position itself as a global advocate for peace. Recent events, including the withdrawal of $3.5 billion in deposits by the United Arab Emirates, have strained Pakistan’s foreign exchange reserves, revealing its reliance on external aid.
While inflation has stabilized, the economy faces challenges due to high interest rates advised by the IMF, which have hindered investment and export competitiveness. The country’s external position remains precarious, reflecting a cycle of low growth and financial fragility.
