ISLAMABAD: The IMF has asked Pakistan to significantly restrict direct contracts between government agencies and state-owned companies.
The lender wants such contracts allowed only in exceptional and clearly justified situations. The issue has delayed Pakistan’s new public procurement rules.
The proposed rules are designed to replace the Public Procurement Rules 2004. Pakistan was required to approve and notify the new PPRA Rules 2026 by June.
The deadline was part of Pakistan’s Governance and Corruption Diagnostic Assessment action plan. However, the government missed the deadline due to differences with the IMF.
The main disagreement involves direct contracting with state-owned enterprises. The issue is covered under Rule 32-F of the proposed procurement framework.
The IMF has proposed tighter conditions for direct awards. It says government agencies should normally avoid awarding contracts directly to SOEs.
The restriction would cover goods, construction works, services and consultancy contracts. The proposal applies to professional, autonomous and semi-autonomous state organizations.
Under the proposed framework, direct contracts could still be allowed in limited cases. These cases would need a clear public interest justification.
The IMF has identified urgent and geographically scattered projects as possible exceptions. Remote works and services could also qualify under certain conditions.
The proposed approach aims to increase competition in government procurement. It would also reduce the possibility of unfair advantages for state-owned entities.
Another important issue involves subcontracting limits. The IMF has suggested that subcontracting should not exceed 40 percent of total project work.
The limit would apply when specialized parts of a project require outside support. Pakistan has accepted the proposed 40 percent ceiling.
However, Pakistan has suggested some flexibility regarding financial limits. It wants the relevant authority to revise those limits when necessary.
The IMF has also proposed strict consequences for exceeding the allowed subcontracting limit. Such violations could be treated as a material deviation.
They could also fall under rules covering prohibited procurement conduct. These rules include collusive, coercive, corrupt, fraudulent and obstructive practices.
The IMF has further called for stronger disclosure requirements. Government agencies would need to provide more information when approving direct contracts.
The proposed disclosure measures could improve transparency in public procurement. They may also help strengthen oversight of government spending.
The disagreement has delayed the finalization of Pakistan’s new procurement framework. The government and the IMF are still working on the disputed provisions.
The new rules are expected to establish clearer procedures for government contracting. They are also aimed at improving transparency and competition.
The outcome of negotiations over Rule 32-F could shape how Pakistan awards contracts to SOEs. It may also affect the role of state-owned companies in future public projects.
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The IMF has maintained that direct contracting should remain an exception. Pakistan must balance this demand with its existing procurement and administrative requirements.
