akistan’s continued reliance on the International Monetary Fund is a matter of great concern. 77 years after independence, Pakistan’s fiscal sovereignty remains tenuous. A $7 billion bailout package now awaits approval by the IMF’s executive board and timely confirmation of key finance assurances from Pakistan’s development partners.

Pakistan has benefited from several IMF programmes in the past with varying levels of success. The current programme’s success depends on the government’s commitment to structural reforms, political stability and effective management of social impacts. Before we delve into finding a solution to this dependency, we must pause and reflect on how we reached this point.

Pakistan became a member of the IMF in 1950. Since then, it has actively engaged in 24 IMF programmes, including the current one, to address balance of payments issues, fiscal imbalances and structural weaknesses in the economy. These structural weaknesses include a weak tax base, a lack of export diversification and a large informal economy.

This has established Pakistan as the biggest IMF debtor in the Asia Pacific and the fourth largest globally, following Argentina, Egypt and Ukraine. India, which gained independence at the same time as Pakistan, has sought assistance from the IMF seven times. It has not had to ask for it since 1993. India’s successful repayment of all its loans from the IMF by May 2000 is a testament to its financial discipline and economic growth. Since

Pakistan’s history of IMF loans is evidence of the country’s struggle with financial mismanagement. The first IMF loan of $25 million in 1958 was in response to the balance of payment issues. The largest IMF loan, totalling $7.6 billion, was received in 2008. This frequent reliance on IMF assistance, a pattern that has persisted over the years, can be attributed largely to chronic financial mismanagement, rampant corruption and democratic backsliding and has hindered sustained economic progress.

The IMF programmes usually contain conditions to improve macroeconomic stability and implement structural reforms, such as reducing government spending, increasing tax revenue and improving the business environment. However, these bailouts have created a cycle of dependency without addressing the underlying issues in Pakistan’s economy.

In short, the IMF programmes have provided temporary relief for Pakistan’s recurring economic crises triggered by political instability, resistance to reforms, and external economic shocks, such as global oil price fluctuations and geopolitical tensions. Regrettably, the present situation mirrors the past. We still face similar challenges due to political instability, lack of continuity in monetary and fiscal policies and resistance to reforms, which hindered the implementation of necessary changes vital for the success of IMF programmes in the past.

Public debt has a crucial role in fostering economic development. It allows governments to invest in infrastructure, education and healthcare, essential for economic growth. However, it can also become burdensome when it increases excessively or rapidly.

IMF programmes have provided temporary relief for Pakistan’s recurring economic crises, triggered by political instability, resistance to reforms and external economic shocks, such as global oil price fluctuations and geopolitical tensions. 

The Ministry of Finance’s recent Debt Sustainability Analysis Report for 2025-27 has highlighted that Pakistan is still vulnerable to a range of risks related to debt sustainability, primarily due to its substantial debt burden and the resulting need for significant financing. This significant financing includes the need to service existing debt, invest in development projects and meet other fiscal obligations. In addition, the report highlights a substantial increase in Pakistan’s total public and publicly guaranteed debt, which has surged to Rs 74.6 trillion as of June 30.

The latest report published by the UN Trade and Development has revealed the staggering scale of the issue: developing countries are now grappling with a rapidly growing and high cost of external debt. Global public debt surged to a record high of $97 trillion in 2023.

Despite public debt in developing countries being less than one-third of the total —$29 trillion — since 2010, it has grown twice as fast as in developed economies. This underscores the need for extreme caution and responsible public debt management. A delay in addressing this issue could lead to severe economic consequences.

For Pakistan to move away from reliance on IMF bailouts, it is imperative to implement a comprehensive and sustained economic reform strategy. The foundation of this strategy is improving fiscal discipline by expanding the tax base, reducing tax evasion and improving tax collection mechanisms.

Improved fiscal management will not only contribute to lowering inflation, narrowing the current account deficit and stabilising the financial sector but also reassure the public and international financial institutions about Pakistan’s financial stability. Furthermore, privatising or restructuring state-owned enterprises is essential to alleviate the fiscal burden. The recent setback following a decision to privatise the National Bank of Pakistan due to a legal obstacle violated the earlier commitment to the IMF to remove the special status of seven government-owned firms, including the NBP.

It is imperative to review the legalities and expedite the privatisation process, as it can improve operational efficiency and governance while diminishing the need for government subsidies and financial support. Economic diversification represents a pivotal strategy for Pakistan’s economic reform. Increasing investment in and diversification of the industrial and agricultural sectors will reduce dependency on specific commodities and bolster export capabilities.

A commitment to create an environment conducive to private-sector investment is indispensable. To attract foreign investment and seamlessly integrate into the global economy, the government must eliminate regulatory constraints, ensure equitable market conditions and promote transparency in governance. Collaboration with international financial institutions and friendly countries can further fortify these endeavours, potentially leading to increased investment and economic growth.

Strengthening legal and institutional frameworks to support anti-corruption measures and ensure accountability across all provinces is an integral component of this strategy.

Investments in renewable energy sources can substantially mitigate Pakistan’s reliance on imported fuels and enhance energy security. Adhering to these strategies can propel Pakistan towards sustainable economic growth, reduce dependency on the IMF and improve overall economic stability.

The writer is a senior lecturer in finance and heads the Business Finance Programme at Birmingham City University, UK. His X handle is @HafizUsmanRana