‘IMF programme is a whole-of-govt, not a finance division programme’

ISLAMABAD: The IMF programme is a whole-of-government programme, not a Finance Division programme: The characterisation that the Ministry of Finance has maintained “tight control” over programme design and negotiations does not accurately reflect the institutional arrangements underlying Pakistan’s IMF programme.

The IMF’s EF and RS Facilities encompass reforms and commitments falling within the mandates of multiple federal and provincial institutions, including Finance Division, Planning Commission/Ministry of Planning, Ministry of Energy, provincial governments, FBR, SBP and other relevant stakeholders.

Concerned ministries and institutions participate and lead technical discussions, including benchmarks setting relating to their respective mandate.

The IMF programme is demonstrably not confined to “numbers” or fiscal targets. The Finance Division fully recognises that macroeconomic stabilisation is a mean towards sustainable and inclusive economic growth. Even, the published IMF programme explicitly encompasses growth-enhancing structural reforms, social protection, governance, energy sector efficiency, climate resilience and reduction of distortions in economy.

The latest IMF staff report specifically states that policy discussions focused on accelerating reforms to support stronger growth, while protecting vulnerable households. Petroleum Levy (PDL) is not the “central point” of the IMF programme. The assertion that Finance Division has made PDL the “central point” of the IMF programme is misleading.

The programme fiscal strategy is substantially broader and revolves around FBR revenue mobilisation, expansion of tax base, provincial taxation, expenditure rationalisation etc. For FY27, the programme specifically emphasises additional revenue mobilisation and strengthening FBR performance rather than relying solely on petroleum taxation. The PDL is one of the revenue instruments and describing it as center piece of programme materially overstates its role.

“No IMF conditionality relating to petroleum levy pricing,” this formulation is technically narrow and potentially misleading.

While the programme does not prescribe a single permanent headline PDL rate in the manner suggested, published programme documents contain explicit details concerning petroleum pricing and levies. These include alignment of domestic fuel prices with international prices through regular adjustments.

The RSF also included a specific reform measure introducing a supplementary carbon levy through the PDL framework. Thus, petroleum pricing policy forms part of the agreed programme framework, rather than being a unilateral fiscal strategy developed solely by Finance Division.

Also, linking PDL directly to inflation, unemployment, poverty and low growth is analytically incorrect and attributes broad macroeconomic outcomes to a single fiscal instrument.

Pakistan’s inflation and growth outcomes reflect multiple factors, importantly prevailing geo-political situation along with domestic and international commodity prices, exchange-rate movements, monetary conditions, fiscal imbalances, external financing constraints and global shocks.

Fiscal stabilisation cannot credibly be separated from growth. Pakistan entered the programme with limited fiscal and external buffers and significant financing requirements. Restoring fiscal sustainability, rebuilding reserves and reducing refinancing risks are necessary conditions for durable private investment and growth.

The IMF’s third-review documents record that fiscal consolidation contributed to reducing macroeconomic imbalances and demand pressures, supported disinflation, and external-sector stabilisation through reserve build-up and recovery in overall growth numbers.

Also, Finance Division has not pursued fiscal consolidation without social safeguards, and supported the programme to incorporates explicit floors and commitments for social protection, i.e., BISP targeted cash-transfer spending, inflation adjustment of unconditional cash-transfer benefits etc.

The latest targeted fuel-subsidy programme is another initiative, while being in an IMF programme, on direction of the Prime Minister to protect vulnerable households through targeted, temporary and fiscally sustainable interventions, rather than untargeted subsidies that create large fiscal liabilities.

Sovereign debt is contingent on fiscal imbalance, and in last financial year, debt growth has been limited to lowest levels in two decades. Agriculture-related commitments are not exclusively with Finance Division. Agricultural income taxation, for instance, is constitutionally and administratively a provincial responsibility, and implementation necessarily involves provincial governments.

Any assessment of these reforms should therefore distinguish between programme coordination by Finance Division and constitutional/administrative responsibilities of the relevant governments and institutions. Lastly, a clear distinction needs to be maintained between Finance Division’s responsibility for overall programme coordination, and agreement on benchmarks with IMF leading to policy-making, legislative and implementation responsibilities of respective federal ministries and provincial governments.

The appropriate policy debate is therefore not “stabilisation versus growth,” but how to transition from stabilisation towards sustainable growth without any fiscal and external imbalances that necessitated reverting to IMF stabilisation programmes, as witnessed in the past.

Copyright Business Recorder, 2026