The International Monetary Fund (IMF) has pushed Pakistan to sharply restrict the practice of government agencies directly awarding contracts to state-owned companies.
The lender says such deals should only be allowed in limited and clearly justified circumstances.
The dispute has delayed Pakistan’s new public procurement rules, which are meant to replace the Public Procurement Rules 2004.
Under its Governance and Corruption Diagnostic Assessment action plan, Pakistan was required to approve and notify the Public Procurement Regulatory Authority (PPRA) Rules 2026 by June 2026.
The deadline was missed as the government and IMF differed over provisions dealing with direct contracts to state-owned enterprises (SOEs).
Contractors, beneficial owners, owners and directors facing certain court proceedings that could lead to bankruptcy, as well as those with previous convictions, could be disqualified from bidding for government procurement.
The biggest disagreement is over Rule 32-F, which governs direct contracting between government bodies and SOEs.
The IMF has proposed that government procuring agencies should not normally award contracts directly to state-owned professional, autonomous or semi-autonomous organisations for goods, works, services or consultancy.
It wants such contracts limited to exceptional cases, including projects involving urgent, geographically scattered or remote works and services where a direct award is considered to be in the public interest.
Where specialised portions of a project need outside assistance, the IMF has suggested that subcontracting should not exceed 40% of the total work.
Pakistan has accepted the 40 percent ceiling but has proposed allowing the relevant authority to change financial limits under the rule from time to time.
Under the IMF’s proposed framework, exceeding the permitted subcontracting limit would be considered a material deviation and could fall under rules dealing with collusive, coercive, corrupt, fraudulent and obstructive conduct.
The IMF has also called for greater disclosure when a direct contract is approved.
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