akistan’s relations with the International Monetary Fund have been characterised by both cooperation and tension. IMF’s involvement in Pakistan’s economy has often been critical, particularly when it comes to structural reforms.

The IMF not only provides financial assistance to Pakistan but also policy prescriptions aimed at addressing its economic challenges such as fiscal deficits, inflation and growth stagnation. Pakistan is currently engaged in a significant economic programme under IMF’s $7 billion 37-month extended fund facility (EFF) that was approved on September 27, to help the country address its fiscal issues and pave the way for sustainable growth.

IMF’s most recent mission to Pakistan, led by Nathan Porter, (between February 24 and March 14) focused on reviewing Pakistan’s progress under the EFF. The two sides also discussed potential new arrangements under the resilience and sustainability facility (RSF).

In an official statement, issued on March 14, the IMF acknowledged substantial progress under the economic reform agenda. The IMF team also emphasised the importance of continuing fiscal consolidation to reduce public debt, maintaining a tight monetary policy to control inflation and accelerating reforms aimed at reducing energy costs and improving structural growth. The IMF urged the Pakistani authorities to show continued commitment towards strengthening social protection, health and education while also focusing on environmental reforms to reduce natural disaster risks.

To achieve substantial consolidation, the IMF has consistently emphasised reductions in public spending, particularly in less productive areas, while taking measures to increase tax revenues. Pakistan’s tax-to-GDP ratio remains low and efforts to broaden the tax base have been largely unsuccessful. This has frequently triggered borrowing and debt accumulation.

Monetary policy has been another area of concern. On IMF’s insistence, the State Bank of Pakistan has tried maintaining a tight monetary policy. However, this comes at the cost of higher borrowing costs, which could stifle private-sector investment and economic growth.

One of the critical areas identified by the IMF for reform is Pakistan’s energy sector. It has long been plagued by inefficiencies, including high transmission losses, growing circular debt and reliance on expensive energy imports. These have resulted in expensive electricity which has become a major burden on households and businesses alike. The proposed reforms include reducing energy subsidies, increasing tariffs and improving management of energy sector state-owned enterprises. Despite being unpopular, these measures are essential for creating a more sustainable energy sector that can support Pakistan’s growth ambitions.

Beyond fiscal and monetary policies, structural reforms meant to improve business environment, enhancing competitiveness and diversifying economy are central to IMF’s economic programme for Pakistan. Since the industrial base remains narrow and cost of doing business is high, the country has struggled to attract significant foreign direct investment (FDI). This is crucial for technological advancement and job creation.

Successful completion of IMF’s programme will require both commitment and cooperation from all sectors of economy and segments of society. With the right policies and human resource in place, Pakistan can end the perpetual economic uncertainty.

The IMF has urged Pakistan to implement a range of structural reforms, including improving governance, tackling corruption and enhancing the efficiency of state-owned enterprises. Additionally, the IMF has stressed the need for social protection reforms, with a particular focus on rebuilding health and education spending to protect vulnerable populations from economic shocks. Pakistan’s success in implementing these reforms will determine the country’s overall progress.

Besides traditional economic concerns, the IMF has also highlighted the importance of addressing climate change issues. Pakistan is among the nations most vulnerable to the impact of climate change disasters. These include floods and droughts that pose threats to the populace and to its economy, as agriculture and infrastructure are particularly affected.

By integrating climate considerations into the economic programme, the IMF seeks to ensure that Pakistan’s growth trajectory is not undermined by climate-related risks.

Pakistan’s relationship with the IMF continues to evolve.

The IMF has spelled out clear expectations for Pakistan, including a commitment to fiscal discipline, inflation control, energy sector reform and climate adaptation. These goals are achievable, However, they require unwavering political will, robust institutional frameworks and active participation of all stakeholders, including the private sector and the civil society.

To ensure successful completion of the IMF programme and achieve long-term economic stability, Pakistan must focus on several key actions inter alia the following:

Continue its efforts to reduce fiscal deficits by increasing tax revenues and reducing inefficient and unproductive spending. Structural reforms in the tax system are crucial for improving the country’s revenue collection capacity.

State Bank of Pakistan must maintain a tight monetary policy to control inflation while also balancing the need for growth. Interest rates should remain elevated until inflation is firmly under control.

Continue to address inefficiencies in the energy sector by reducing subsidies, improving tariff structures and enhancing management of state-owned enterprises.

Protect vulnerable populations by prioritising social spending, particularly in health and education, to mitigate the impact of economic reforms.

Invest in climate resilience by improving infrastructure, disaster management systems and sustainability of agriculture.

By taking these steps, Pakistan can navigate the challenges of the IMF programme and lay the foundation for a more stable and prosperous economy. However, the success of the programme depends on continued commitment of Pakistani authorities to implement these reforms.

IMF’s ongoing engagement with Pakistan is an important opportunity for the country to address its economic challenges and achieve sustainable growth. The path forward may be difficult, but IMF’s support and suggested reforms in the mission statement offer a clear roadmap for Pakistan’s economic recovery and future stability. Successful implementation of the IMF programme will require both political commitment and cooperation from all sectors of economy and segments of the society. With the right policies and human resource in place, Pakistan can end the perpetual economic uncertainty.

Dr Ikramul Haq, writer and an advocate of the Supreme Court, is an adjunct teacher at Lahore University of Management Sciences.

Abdul Rauf Shakoori is a corporate lawyer based in the USA.