EDITORIAL: There have long been calls for Pakistan to break free from its dependence on international financial institutions, particularly the IMF, which keeps the economy afloat, but only in exchange for strict fiscal discipline and compelling restructuring programmes.
These reforms, though essential to correct distortions in taxation, energy, fiscal management and other areas of the economy, often hit the poorest sections of the population hardest. Furthermore, beyond this cost lies a deeper vulnerability: as global liquidity tightens and more struggling nations turn to the IMF for rescue, its ability to indefinitely sustain economies like ours may soon wane, making it increasingly urgent for Pakistan to build the capacity to manage its economic reforms independently.
This was the central message echoed by speakers at a recent media roundtable organised by the Standard Chartered Bank, where the bank’s global head of research Eric Robertsen cautioned that the era of “plentiful liquidity” is ending. Against this backdrop, he stressed, Pakistan must treat its current IMF programme as the last, pursuing its economic restructuring agenda with urgency and purpose. This would strengthen the economy’s resilience against external shocks through self-driven reforms rather than relying on external bailouts, which may soon prove unreliable, making moving away from IMF dependence not just desirable but essential.
While this assertion is entirely valid, and the logic of undertaking far-reaching reforms to strengthen fiscal discipline, expand the revenue base and improve governance is beyond dispute, the reality sadly is that expecting the ruling elite to pursue such changes on its own has long proved unrealistic, given its entrenched resistance to measures that challenge vested interests or demand genuine accountability. It has often been the looming threat of economic collapse, along with the pressing requirement for a reliable stream of funds to run the country that has compelled rulers to implement the tough measures needed to strengthen the economy’s resilience, guided more by IMF directives rather than by their own initiative.
Political expediency has frequently led to the avoidance of difficult but necessary decisions. Participation in an IMF programme, then, provides a convenient political cover, allowing leaders to blame external pressures and adverse global conditions for unpopular decisions, rather than their own policy failures. There have also been times when it has given them a powerful narrative, invoking the danger of the country defaulting if IMF directives are not followed. In effect, the programme has become a crutch, giving rulers the leverage to enforce fiscal discipline and push through tough reforms despite domestic resistance.
Another key factor is that major bilateral lenders, including China and Saudi Arabia and the UAE, have consistently conditioned their support on Pakistan remaining under IMF oversight, reflecting longstanding concerns over our inability to implement the measures necessary to safeguard stability and maintain the kind of fiscal credibility any prudent financier would expect. Being under international oversight, then, signals to the world that the economy is being managed with some degree of responsibility. Even now, while under IMF supervision, much of the credit for our current stability can be attributed to abundant global liquidity rather than from lasting structural improvements. While there has been some progress in reforming various areas of the economy to address its underlying weaknesses, the scope and pace of these reforms remain insufficient, leaving the economy exposed to renewed vulnerabilities whenever global liquidity tightens, risking a repeat of the familiar boom-and-bust cycle.
So, while being part of IMF arrangements remains unavoidable for now, the ruling class must grasp the necessity of breaking this recurring cycle. Times of abundant global liquidity and generous support from major powers must not be wasted through fiscal recklessness. Such periods should instead be seized to undertake genuine structural transformation, securing enduring economic resilience, with or without external oversight.
Copyright Business Recorder, 2025