Reflections on recently-released country report by IMF

The recently released International Monetary Fund’s (IMF’s, or simply the ‘Fund’s’) country report, indicated completion of the first review of Extended Fund Facility (EFF) programme with Pakistan, and immediately released $1 billion, taking the total disbursement to $2.1 billion.

Overall, the IMF appears comfortable with the country’s performance under the programme, as it points out ‘Pakistan’s policy efforts under the EFF have already delivered significant progress in stabilizing the economy and rebuilding confidence…’

The IMF highlights the concerns facing the progress achieved basically in terms of macroeconomic stability. It points out in this regard, ‘Risks to the outlook remain elevated, however, particularly from global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities.’

In view of these risks, the Fund advises ‘Against this backdrop, the authorities need to maintain sound macroeconomic policies and accelerate reforms to safeguard the macroeconomic gains and underpin stronger and sustainable, private sector-led medium-term growth.’

There are two ways to approach IMF’s conclusions above, whereby basically through adopting monetary-, and fiscal austerity-based EFF programme the country has achieved reasonable level of macroeconomic stability, and it is important that bring sustainability to this stability, and to build economic growth in parallel, it should focus on strong structural reforms, primarily to enhance productivity, competitiveness, resilience – which the author will discuss in subsequent paragraphs, while discussing the other negotiated programme with IMF in the shape of Resilience and Sustainability Facility (RSF) –and revenue collection, and to reduce energy related costs.

Moreover, to continue with austerity policies, in terms of both monetary austerity or tightening, given core inflation is still around 9 percent, and also with regard to fiscal austerity by continuing to maintaining primary surplus.

Second way to look at the overall policy framework of the EFF programme, and the outcomes of this programme reached, is to see it as a tried and tested neoliberal policy framework, where as repeatedly seen over IMF programmes carried out in the country, and mostly elsewhere, some semblance of macroeconomic stability at the back of excessively suppressing aggregate demand – while not doing much to remove aggregate supply bottlenecks to more completely and sustainably curb an important source of inflation in the shape of cost-push inflation – leads to only temporary macroeconomic stability, and that too at a high economic growth sacrifice.

A reflection of this could be discerned from the fact that while CPI inflation is very close to zero – 0.3 percent to be precise for April 2025 – core inflation is still nearing double digit inflation, because structural issues on the aggregate supply have not been addressed as such. From the lens of the first way of looking at this performance – that is the IMF, or the over-board austerity based, neoliberal policy lens – the issue then is only one of carrying out structural reforms, as are being suggested in this report, and similar many reports of IMF previously.

Yet, the reason it is so hard to see structural reforms being implemented is because of the negative role austerity policy plays in leading to serious under-investment in the social sectors that in turn means economically weak demos, not being able to put enough pressure on the policymakers to adopt policies – like expanding the tax base, reducing electricity theft, among others – which are counter-productive to well-perpetuated extractive economic institutional design of the politico-economic elites.

Moreover, the lack of bite of these structural reforms, given their neoliberal orientation, means a very limited role of government in the first place, and hence profit motive reigns supreme, while the rights of the demos are not protected against the enrichment of politico-economic elites through minimal regulation of markets, or their proper creation at the back of well-capacitated, reformed economic institutions or ministries, and the underlying organizations or government departments.

In addition to the completion of the first review of EFF, the country report also highlights that successful negotiation of RSF programme with Pakistan for increasing climate change-related economic resilience.

Although, in principle, a good programme to negotiate, yet the amount of $1.4 billion, and that too to be provided in multiple tranches up till September 2027. This is too little an amount, and which is to be provided over a little longer than the next two years, given the large funding needs for a country, which falls among the ten-most climate change vulnerable countries, and also under a high level of urgency in the wake of the fast-unfolding climate change crisis.

Another problem is a rather shocking view being carried by the IMF, and which is in terms of the extent of the release of greenhouse gases (GHG), whereby it indicates ‘Pakistan is among the world’s largest emitters of greenhouse gases (GHG). In 2021, the country contributed about 1 percent of the world’s total GHG emissions… which represented 488 million tons of GHG. This places Pakistan among the largest 20 GHG emitters worldwide…’

At the same time, and which is in line with the widely accepted reality in policy discussions and literature that Pakistan has a very low carbon footprint globally, is the one carried by World Bank in the same country report, where it indicates this in its ‘…Assessment letter for the Resilience and Sustainability Facility’ as follows: ‘The 2022 floods showed Pakistan’s high vulnerability to climate change despite contributing less than one percent of global greenhouse gas emissions.’

IMF has a very wrong line of reasoning because just being among the top twenty countries does not mean that it is big GHG contributor because firstly, according to European Commission’s ‘Emissions Database for Global Atmospheric Research’, the GHG contributions of China is around 30 percent in total emissions globally, and the US is around 11 percent (and that too over many decades, if not over a century, it is contributing high amounts of GHG), while contribution of EU27 is around 6 percent. Secondly, many other countries are contributing close to or below one percent, that is why Pakistan’s contribution is at a low of 1 percent among contributions from around 190 plus countries globally.

On a rather less important note, although it does show some lack of professionalism in preparing the country report is that the writer found a typographical error in the very press release at the start of the report, where it should be June 2024 in the following sentence ‘Inflation fell to a historic low of 0.3 percent in April, and progress on disinflation and steadier domestic and external conditions, have allowed the State Bank of Pakistan to cut the policy rate by a total of 1100 bps since June 2025.’ Also, the writer came across two wrongly numbered pages, that is page 42 is followed by page 45 and page 118 is followed by page 124, while the sequence starts properly after both these pages.

Copyright Business Recorder, 2025