IMF Tells Pakistan Govt to Stop Awarding Contracts to Itself

The International Monetary Fund (IMF) has advised Pakistan to place strict limits on government agencies awarding contracts directly to state-owned companies. The lending institution contends that these transactions should only be permissible in specific, well-founded scenarios. This disagreement has hindered the implementation of Pakistan's new public procurement rules, which aim to supersede the Public Procurement Rules 2004.

In accordance with its Governance and Corruption Diagnostic Assessment action plan, Pakistan was tasked with approving and notifying the Public Procurement Regulatory Authority (PPRA) Rules 2026 by June 2026. The delay stemmed from disagreements between the government and IMF concerning provisions related to direct contracts with state-owned enterprises (SOEs).

Contractors, their beneficial owners, owners, and directors involved in certain court proceedings potentially leading to bankruptcy, as well as those with a history of convictions, could be barred from bidding for government procurement projects. The primary point of contention revolves around Rule 32-F, which governs the direct contracting between government bodies and SOEs.

The IMF has suggested that government procuring agencies should typically not award contracts directly to state-owned professional, autonomous, or semi-autonomous organizations for goods, works, services, or consultancy. Instead, such contracts should be restricted to exceptional cases, such as projects involving urgent, geographically dispersed, or remote works and services where a direct award is deemed to be in the public interest.

In cases where specialized components of a project necessitate external assistance, the IMF recommends that subcontracting should not exceed 40% of the total work. Pakistan has agreed to this 40 percent ceiling but has proposed allowing the relevant authority to adjust financial limits under the rule at any time. Under the IMF's proposed framework, surpassing the allowed subcontracting limit would be deemed a significant deviation and could be considered collusive, coercive, corrupt, fraudulent, or obstructive conduct. The IMF has also emphasized the need for increased transparency when a direct contract is approved.