akistan’s struggle to secure a staff-level agreement with the International Monetary Fund is still on. The IMF has made it clear that more reforms are needed before further financial assistance can be pledged.

Lack of fiscal discipline has been at the heart of Pakistan’s economic woes. This year, the budget deficit is projected to exceed 7 percent of GDP, beyond what the IMF considers sustainable. The tax-to-GDP ratio, hovering around 9.5 percent, remains one of the lowest in the region. Some of people who should be paying the most taxes continue to avoid doing that. The Federal Board of Revenue has struggled to rein in tax evasion. However, successive governments, regardless of their political ideologies, have been reluctant to get tough with them. Real estate and agriculture lobbies have long enjoyed exemptions. The governments lean on indirect taxation that hits the lower-income classes the hardest. The IMF has repeatedly pressed Pakistan to widen its direct tax base and eliminate arbitrary exemptions.

The so-called circular debt in the energy sector is a serious problem. The amount has now reached Rs 2.6 trillion. The staggering burden is owed to inefficiencies, power theft, delayed tariff adjustments and transmission losses. The IMF has asked Pakistan to clean up the mess: cut subsidies, ensure government institutions pay their bills, and privatise loss-making power distribution companies. But reforming the energy sector isn’t just an economic issue; it’s also a political one. Raise electricity tariffs, and there’s a public outcry. Vested interests will not hear of privatisation. Every step forward seems to risk backlash. Successive governments have chosen to tread carefully. However, such caution is no longer a viable strategy.

The exchange rate is another sore point. The IMF calls for a market-driven exchange rate, which Pakistan has struggled to embrace. The sustainable way to stabilise the currency is to boost exports and attract foreign investment. However, businesses are wary of the unpredictability that has come to define Pakistan’s economic policies. Without a clear direction, capital continues to be evasive and investor confidence shaky.

There are more than 200 state-owned enterprises. Pakistan International Airlines, Pakistan Steel Mills and various power sector companies suffer from chronic inefficiency, mismanagement and political interference. Privatisation has been proposed time and again. However, progress on that front progress has been sluggish. The IMF advice has been clear: sell off the loss-making entities or reform them to make them sustainable. Pakistan has yet to do either.

If the goal is to secure IMF support and to break the cycle of economic instability some tough choices have to be made.

Beyond the numbers, governance and corruption continue to be thorny issues. The IMF has repeatedly called for strong institutional reforms, greater transparency in public financial management and stricter anti-corruption measures. Governance reforms require more than tweaks; they also demand a cultural shift in how institutions operate.

So where does Pakistan go from here? If the goal is to secure IMF support and to break the cycle of economic instability, some tough choices have to be made. Tax collection needs an overhaul. The government must broaden the tax base, digitalise tax administration and take firm action against evasion. Progressive taxation should replace the reliance on indirect taxes, ensuring a fairer distribution of the burden. The energy sector needs a major shake-up. Subsidies must be rationalised, theft needs to be curbed and privatisation has to be acknowledged as a necessity.

The exchange rate needs to be market determined. Long term stability will only come when exports grow, investment flows in and businesses can operate in a predictable environment. Structural reforms, particularly in state-owned enterprises, should not be subject to political pressures.

Pakistan cannot afford to keep repeating the mistakes that have resulted in its present problems. Without IMF backing, it will struggle to meet its external debt obligations. Also, IMF support is not a long-term solution either; it’s a lifeline that comes with tough conditions. The reforms may be difficult, even painful, but they are necessary. If Pakistan wants a different future, it needs to make different choices. That means taking decisive action, not just to appease lenders, but to secure a future where economic stability is not just an aspiration, but a reality.

The writer is a chartered accountant and a business analyst