The IMF lifeline

Pakistan’s continued progression under the IMF programme has been secured, with IMF staff and Pakistani authorities reaching a staff-level agreement on the first review under the country’s 37-month Extended Fund Facility (EFF) on Wednesday. The SLA also included a new 28-month arrangement under the Resilience and Sustainable Facility (RSF). Now, the IMF’s Executive Board will consider the approval of approximately $2.3 billion in loans, with expectations that Islamabad will be able to secure the money in the first week of May 2025, ahead of the upcoming budget for FY2025-26. This is also when an IMF mission is expected to visit Pakistan to help finalise the next budget, with a particular focus on taxation measures and curtailing unbridled expenditures. This is certainly good news, especially when it comes to the RSF part, which aims to support Pakistan’s climate change resilience, mitigation and adaptation and natural disaster management efforts. The RSF will also reportedly help support water management and align energy sector reforms with climate change mitigation targets. Most importantly, Pakistan’s economy remains afloat for another six months or so. If even this target had not been achieved, then all the economic austerity and tariff pains that people have endured over the past 18 months would have been for naught.

That being said, no matter how hard-won and essential macroeconomic stability is, this is only the first step. The country still faces the challenge of moving beyond a fundamentally broken, import-heavy growth model. This is something Pakistan simply cannot afford and, in that context, it is no surprise that a programme geared towards making Pakistan live within its means has seen growth come to a virtual standstill. As a result, ordinary people have seen their bills and cost of living balloon while salaries and job opportunities either remain the same or dwindle. The country’s long-awaited transition to a more competitive and export-led model of growth still remains elusive. In fact, even with what little growth Pakistan has had since signing the EFF back in September 2024, the country was back in a current account deficit of $420 million by January and remained in the red in February too.

Turning this picture around on a permanent basis must be one of the main aims going forward, enabling the country to grow in a more sustainable manner where it does not have to keep going back to the IMF every few years. The path towards this goal will require taking on some powerful constituencies too used to the old import-based system, including the country’s failing SOEs. Privatising the latter is something the state has been trying to do for almost two decades now with little to show for it. Simultaneously, the country will need to stay on the tough fiscal path outlined by the IMF. In this context, the FBR’s struggles to meet revenue collection targets are not reassuring. The IMF might have allowed for some leeway this time but one does not know if this will be the case come the next review. Ordinary people have already been squeezed as much as possible, it is now the turn of the big fish to do the necessary for the country’s economic future.