OPINION: The flaws in the narrative

The narrative that the economy has stabilized and is now embarked on the road to growth is not finding traction with the general public.

The reason: the failure of the stakeholders to take account of the disconcerting ground realities as incomes continue to contract (private sector wages have remained constant for the past four to five years while prices continue to rise), coupled with ongoing closure of industrial units (multinational and local) due to rising input costs, thereby fuelling unemployment.

The Cabinet members claim successes through the mainstream media, which is no longer the sole source of information for the general public – not in Pakistan, and not globally.

Be that as it may, frequent claims in parliament/press briefings/conferences led by federal ministers, including the economic team leaders, continue as has long been the practice where questions are managed through supporters within the media with rather rare instances of a reporter raising a concern out of turn. Their target audience is clearly powerful stakeholders and a relatively small group of independent analysts and not the general public, especially as discussants use terminology that the majority of Pakistanis cannot relate to.

Three recent statements by the Finance Minister Muhammad Aurangzeb merit consideration.

Aurangzeb stated on the floor of the House that the government had approached the IMF to undertake the Corruption and Governance Diagnostic (CGD) – cited as a prior condition for the IMF approval of the disbursement of the second tranche release of the USD 7 billion Extended Fund Facility (EFF) and the first tranche release of the USD 1.4 billion Resilience and Sustainability Fund (RSF).

He is technically correct; however, it is fairly obvious that the Fund post-2019 (with the exception of the Covid years) has been increasingly rigid in adapting programme design to the government’s political sensitivities.

The reason is noted in the 10 October 2024 EFF approval documents: “deviations from consistent implementation of programmed policies have created significant domestic and external imbalance. This program is designed around some of the lessons from this experience based on responses to past Article IV advice and lessons from past programs, especially around the timing, scope, and sequence of conditionality and institutional reforms, including at the federal and provincial levels, and the need for strong ownership.”

The Finance Minister publicly acknowledged that there was a delay in the release of the CGD – it was due to be released in August but was released on 10 November – but contended that it was due to the review process involving 100 meetings and feedback from 30 entities which, he claimed, was standard procedure.

However, credible reports suggest that there were serious disagreements over the definitions, findings and recommendations of the report between the Fund and 30 Pakistani entities and that these entities were forced to back down eventually as the need for the tranche release became acute – a release on which the USD 12 plus billion rollovers by the three friendly countries were also contingent.

The Fund noted in the uploaded 11 December 2025 second review documents section titled EFF Policy Discussions that “the authorities have published on the Ministry of Finance’s website the GCD report in November 2025 (Prior Action).

Owing to the need for wide stakeholder consultations and a delay in publishing the report, additional time will be needed to develop and publish the corresponding action plan (end-October 2025 SB, proposed to be reset to end-December 2025).”

Second, Federal Finance Minister Muhammad Aurangzeb noted that climate change and population growth are critical challenges, which cannot be denied – the first necessitates infrastructure improvements designed to withstand floods and the second to reduce the 82 percent criterion given to population as per the National Finance Commission (NFC) award.

A recent report by the National Institute of Disaster Management and National Disaster Management Authority titled Comprehensive Study of Flood Events in Pakistan 1950 to 2025 recommended: (i) strengthening climate resilience through adaptive infrastructure and early warning system through construction of infrastructure that can withstand flooding; (ii) addressing Urban Flooding Through Sustainable Infrastructure and Smart Planning Urban flooding, particularly in cities like Karachi, Lahore and Rawalpindi; and (iii) modernizing drainage infrastructure.

The USD 1.4 billion RSF extended to Pakistan came with policy limitations; notably, that it is a “concurrency” programme, meaning it requires a concurrent Fund arrangement like the EFF that in turn is designed to ensure a stable macroeconomic environment and policy safeguards.

In other words, the RSF disbursement includes policies of fiscal consolidation, strengthening social protection, maintaining tight monetary policy, and restoring the energy sector’s viability.

The government budgeted 2.7 billion rupees for the climate division, against 5.2 billion rupees budgeted last year.

The budgeted allocation embedded in the Public Sector Development Programme (with disbursements massively slashed in the first quarter from the budgeted one trillion rupees due to very narrow fiscal space) are as follows: climate mitigation allocated 603 billion rupees in the current year against 212.8 billion rupees in the revised estimates last year, climate adaptation allocated a sizeable 85.4 billion rupees against the revised estimates of 46.6 billion rupees for last year and supporting areas budgeted at 28.3 billion rupees against 18.8 billion rupees in the revised estimates of last year.

Details of the budgeted subsidies as PSDP’s green component are cited as follows: subsidies of 587.3 billion rupees (49.5 percent of total subsidies) with energy receiving 529 billion rupees (defined as directly favourable), food 20 billion rupees (indirectly favourable), and agriculture 22 billion rupees (indirectly favourable).

No significant changes have been identified in the federal or provincial public sector development programmes or subsidies in the current year compared to the year before that would have provided a comfort level that specific climate related reforms are underway - a program design flaw that can be attributed to both the Fund and the Pakistan authorities

In the NFC meeting held on 4 December the federal government reportedly sought provincial expenditures, which was denied on the grounds that the constitutiondoes not allow the Centre to demand this.

Eight committees were set up to look at a possible readjustment of the existing criterion (though they number four notably population 82 percent, poverty or backwardness 10.3 percent, revenue collection or generation 5 percent and inverse population density 2.7 percent).

Past precedence indicates that the chair of the NFC, the Finance Minister, must be politically powerful to reach a consensus in the NFC. One would hope that the incumbent does command influence across the political divide.

And finally, the Finance Minister also claimed that the 2025 floods would erase half a percentage point of GDP growth though he failed to identify whether it would be in the previous fiscal year (the floods began in June with the fiscal year ending 30 June) or the current fiscal year.

In this context, it is relevant to note that the IMF is currently supporting the Pakistan Bureau of Statistics with a technical assistance after noting “important shortcomings remains in the source data available for sectors accounting for around a third of GDP.”

To conclude, the economic team leaders must target the public’s major source of information, given the communication revolution in the past decade in their drive to reach the common man, the one most affected by reforms, rather than making statements that do not find any traction, given the deteriorating quality of life of the general public.

Copyright Business Recorder, 2025