erhaps for the first time in our arrangements with the International Monetary Fund, the donor agency has committed to release a second tranche of a 9 month-programme to a caretaker government.

As usual, the IMF expects the caretakers to follow the agreement it signed with the previous government.

The PDM government implemented tough IMF conditions at the cost of public support. It also assured the IMF that the caretaker setup will honour its commitments.

The caretakers did not disappoint the IMF. On its very first day in power, the caretaker federal government announced a big raise in the petroleum product prices. It can be argued that the raise was inevitable following a raise in global crude oil rates and decline in the rupee value.

Under conditions agreed with the IMF, the government of Pakistan is to charge a minimum of Rs 55 per litre petroleum levy on sales of petrol and diesel. After some time, the levy has to be increased to Rs 60 per litre. Had the price been kept unchanged the petrol levy would have declined to Rs 35 per litre for diesel and Rs 37.5 for petrol.

The national economy is going through a very tough time. We have to comply with the recipe for economic revival suggested by the donor agency. The conditions are tough on ordinary citizens because most IMF conditions somehow relate to generation of revenues or curtailing expenses. Governance and transparency, meanwhile, become secondary concerns.

Accepting IMF conditions on generating revenue, while failing to improve governance and transparency, has led to a range of economic, social and political consequences for the country. It has created a permanent economic instability.

The IMF conditions are often designed to stabilise a country’s economy by addressing fiscal deficits, reducing public debt and maintaining exchange rate stability. If the country fails to improve governance and transparency, corruption and mismanagement persist, undermining the effectiveness of the revenue generation measures. This can result in ongoing economic instability, hindering long-term economic growth and development.

Elected governments often lack the resolve to confront vested interests. Caretaker governments, having no political aims, can take tough decisions to put the economy back on track. Generally, caretaker setups in Pakistan govern the country for a little over two months. This time around it seems that the caretaker setup will last much longer partly because of fresh delimitation of constituencies decreed by the Election Commission of Pakistan. They have the time to assert on governance and transparency. They should take steps to improve service delivery. They might as well have time to privatise some of the inefficient public sector entities.

This is a rare opportunity for the caretaker Executive, who must work hard to eliminate power inefficiencies; make the schools deliver quality education; and ensure delivery of services at public healthcare centres. There has been a visible improvement, for instance, in the healthcare system in the Punjab where the caretaker chief minister has used his longer than usual tenure to improve health services in the province.

Caretakers and the concerned circles must realise that backing off from the IMF programme is not an option. The agreed conditions agreed must be implemented in letter and spirit. 

The failure to address governance and transparency issues has resulted in the misallocation of resources, including borrowed funds. This has exacerbated the country’s debt burden, as borrowed funds were not used efficiently to stimulate growth or address pressing social needs. High levels of debt combined with ineffective governance has led to a cycle of borrowing and debt accumulation.

The socio-economic inequality that we observe today is because of lack of governance and transparency that has perpetuated a system where resources are diverted to the hands of a few. This has resulted in social unrest, protests and a general sense of dissatisfaction among the population.

The failure to improve governance and transparency has also eroded public trust in government institutions. This has led to declining citizen engagement, tax evasion and a lack of cooperation in implementing necessary economic reforms.

Weak governance and lack of transparency has discouraged foreign investors, as they perceive increased risks associated with corruption, lack of contract enforcement and uncertain regulatory environments. This has led to reduced foreign direct investment and hindered economic diversification and growth.

Persistently weak governance and a lack of transparency have also contributed to political instability. This instability has created an environment of uncertainty and unpredictability, which further deters investment and economic growth.

The failure to improve governance and transparency has also impeded the efficient utilisation of resources, including human capital. This has resulted in numerous missed opportunities for development in areas, such as education, healthcare and infrastructure.

Continuously failing to address governance and transparency concerns has severely damaged Pakistan’s reputation. This has resulted in strained relations with international organisations, donors and other countries, making it harder to access financial assistance and support.

Revenue generation measures imposed by the IMF may not yield the desired outcomes if they are not supported by improvements in governance. This can lead to a situation where the country struggles to meet its obligations under the IMF programme, further jeopardising its financial stability.

While revenue generation measures are an important aspect of economic reform programmes, they are most effective when coupled with improvements in governance and transparency. The failure to address these issues can undermine the intended benefits of IMF assistance and perpetuate a cycle of economic instability and underdevelopment.

Leaders of the caretaker government must realise that backing off from the IMF programme is not an option. The agreed conditions must be implemented in letter and spirit.

There is a need for progressive taxation. Also, the untaxed sectors of the economy need to be brought into the tax net.

Pakistani governments have struggled in the past to meet the IMF conditions. Now is also the time for the government to get rid of the loss-making public sector entities.

The writer is a senior Lahore-based economic reporter at The News International