Pakistan’s Dependence on IMF Highlights Need for Structural Reforms Beyond Stabilisation

Pakistan’s economic trajectory remains under intense scrutiny as the government continues to rely heavily on International Monetary Fund (IMF) programmes for stabilisation, raising concerns over long-term growth prospects for working families. While IMF support provides immediate fiscal relief, experts argue that it neither offers a sustainable development roadmap nor substitutes for structural reforms essential for inclusive growth.

The country is currently in the second year of its 24th Extended Fund Facility arrangement, a $7 billion, 37-month programme designed to stabilise macroeconomic indicators such as inflation, fiscal deficits, and foreign exchange reserves. IMF programmes, however, are stabilisation tools, not engines of growth. Their conditions—focused on fiscal consolidation, utility pricing, tax reforms, and state-owned enterprise restructuring—often impose heavy social costs while failing to generate sustainable investment and job creation.

Economists point to a chronic gap between short-term stabilisation and long-term development. Dr Aliya Hashmi Khan, adviser to local and international institutions, highlights weak alignment between government policies and a clear growth paradigm. Institutional fragility, policy uncertainty, and volatile economic conditions limit the state’s capacity to implement structural reforms that could unlock Pakistan’s human and natural resource potential.

Dr Nadeem ul Haq, former vice chancellor of the Pakistan Institute of Development Economics, emphasises that while IMF programmes can steady an economy, they cannot chart a path for sustainable growth. According to him, policy debates in Pakistan remain dominated by political appointees and bankers focused primarily on meeting IMF conditions, leaving little room for homegrown, innovative solutions. The economist community, he adds, often functions as passive observers rather than active contributors to reform design, narrowing Pakistan’s policy space.

Business leaders echo similar concerns. Mashood Ali Khan, an auto industry representative, criticises IMF policies for their lack of political neutrality. Reforms such as tariff rationalisation, removal of industrial-zone incentives, high energy costs, and stringent interest rates are deepening de-industrialisation, deterring investment, and creating vulnerabilities in sectors like electric vehicles where local capacity is limited. Dr Kaisar Waheed of the pharmaceutical industry also notes that IMF programmes address urgent stabilisation but conflict with long-term objectives, including growth, employment, and poverty reduction.

Some voices defend the IMF’s role. Majyd Aziz, former president of the Employers’ Federation of Pakistan, stresses that Pakistan approaches the Fund only after economic deterioration. According to him, the real challenge lies in weak implementation, elite capture, and resistance to structural reforms, not IMF conditionalities. Dr Khaqan Hasan Najeeb agrees, highlighting that IMF engagement supports short-term macro-stability, but longer-term goals—export diversification, industrial upgrading, and productivity-driven growth—require far-reaching structural interventions.

The overarching concern among analysts is the absence of a coherent domestic strategy that links fiscal stabilisation with inclusive growth. Without clear goals, sequencing, and policy innovation, Pakistan risks perpetuating dependence on external support while leaving fundamental development gaps unaddressed.

Muhammad Sohail, CEO of Topline Securities, summarises the dilemma succinctly: in times of economic distress, Pakistan must follow IMF guidance, yet without complementary homegrown reforms, stabilisation alone cannot secure sustainable prosperity for working families.

In sum, while IMF programmes remain critical for immediate economic relief, experts call for bold, locally-driven reforms to translate short-term stability into long-term growth, industrialisation, and employment generation, reducing the country’s recurring reliance on international bailouts.

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