The IMF has urged Pakistan to sharply limit direct government contracts with state-owned enterprises (SOEs). The lender wants such contracts allowed only in exceptional and justified cases.
The disagreement has delayed Pakistan’s proposed Public Procurement Regulatory Authority (PPRA) Rules 2026. These rules are expected to replace the existing Public Procurement Rules 2004.
Under its Governance and Corruption Diagnostic Assessment action plan, Pakistan had to approve the new rules by June 2026. However, differences over direct contracting caused the deadline to be missed.
IMF Seeks Tighter Rules for SOE Contracts
The main dispute concerns Rule 32-F of the proposed procurement framework. The rule covers direct contracts between government agencies and SOEs.
The IMF has proposed restricting these contracts for goods, works, services and consultancy. It says direct awards should generally not be used for such procurement.
Exceptions could apply to urgent or geographically scattered projects. Remote works and services could also qualify under specific public-interest conditions.
The proposed approach aims to increase competition in government procurement. It could also reduce opportunities for preferential treatment and improve transparency.
40% Subcontracting Limit Proposed
The IMF has also proposed limits on subcontracting by state-owned organisations.
Under the proposed framework, specialised parts of a project could be outsourced. However, subcontracting would generally remain limited to 40% of the total work.
Pakistan has accepted the 40% ceiling. However, it has proposed allowing the relevant authority to revise financial limits periodically.
The IMF has raised concerns about exceeding the permitted subcontracting limit. Such violations could be treated as material deviations under procurement rules.
These rules cover practices such as collusion, corruption, fraud and coercion.
Greater Disclosure Required
The IMF has also called for greater transparency when direct contracts are approved.
It has proposed requiring officials to provide written justification for exceptional direct contracting. The relevant information would also be made publicly available through the electronic procurement system.
The government’s draft does not fully match this disclosure requirement. Further changes could therefore be made before final approval.
The proposed rules also include stricter eligibility conditions for government contractors. Certain individuals facing bankruptcy-related proceedings or previous convictions could be barred from bidding.
In other related news also read IMF Signals Economic Stability Ahead of Pakistan Review
The new framework is intended to strengthen Pakistan’s public procurement system. It also seeks to improve competition, accountability and transparency in government contracts.
