IMF report: Structural rot should be addressed immediately: Mian Zahid

KARACHI: Mian Zahid Hussain, President Pakistan Businessmen and Intellectuals Forum & All Karachi Industrial Alliance, Chairman National Business Group Pakistan and Chairman Policy Advisory Board FPCCI, said that while the Ministry of Finance’s latest report shows the economy is stabilizing, the International Monetary Fund’s (IMF) recent diagnostic report serves as a critical wake-up call that “stabilization alone is not enough.”

Commenting on the two major economic reports released this week, Mian Zahid Hussain said that the government deserves credit for the historic reduction in public debt by Rs. 1,371 billion in the first quarter—the first such reduction in five years. “The Ministry of Finance’s data confirms that fiscal discipline is taking root, with tax collections (although failing the target) rising by 11.4% to Rs. 3.8 trillion and Large Scale Manufacturing (LSM) recovering to post a 4.4% growth,” he observed.

However, the veteran business leader warned that these gains could be short-lived if the structural rot identified in the IMF’s Governance and Corruption Diagnostic Report is not addressed immediately. “The IMF report, prepared on the request of the government, has rightly pointed out that corruption is ‘persistent and corrosive’ and that our tax system is ‘opaque and prone to manipulation’,” Mian Zahid said.

Mian Zahid said “while the Finance Ministry celebrates the victory of debt reduction, the IMF is warning us about the systemic bleeding. We cannot sustain this recovery if, as the IMF notes, elite capture and regulatory complexity continue to stifle the private sector.”

Mian Zahid stated that the IMF report explicitly demands the separation of tax policy from administration to end harassment and corruption. “We welcome the operationalization of the Tax Policy Office, but it must be empowered to simplify the tax code, rather than just meeting targets through squeezing existing taxpayers,” he added.

Mian Zahid welcomed the surge in remittances (USD13 billion) and a stable reserve position ($19.7 billion) and pointed out that “Foreign investment requires trust in the rule of law, not just special waivers.” He advised that the government must implement the IMF’s recommendation to make all investment incentives public to avoid creating new distortions.

With the current account deficit widening to USD733 million due to industrial revival, Mian Zahid Hussain warned that without the governance reforms suggested by the IMF to cut the cost of doing business, our exports will remain uncompetitive. “We are seeing a recovery in garments and autos, but we must ensure this doesn’t lead to another balance of payments crisis,” he said.

Mian Zahid Hussain concluded that the government has successfully pulled the economy out of the ICU, as shown by the Finance Ministry’s report, but now it requires the “major surgery” of governance reform as prescribed by the IMF to ensure long-term health.

Copyright Business Recorder, 2025