EDITORIAL: Pakistan has been subjected to extremely limited leverage by IMF since 2019
EDITORIAL: International Monetary Fund’s (IMF’s) Executive Board approved the second review of the Extended Fund Facility (EFF) and the first review of the Resilience and Sustainability Facility with Pakistan on the 8th of December as scheduled — one day less than eight weeks and 11 board meetings that took place since the mission announced the completion of the staff-level agreement on 15 October. Pakistan has been subjected to extremely limited leverage by the IMF since 2019 due to, as per the EFF programme approval documents dated October 2024, “deviations from consistent implementation of programmed policies have created significant domestic and external imbalance.
This programme (the ongoing EFF) is designed around some of the lessons from this experience based on responses to past Article IV advice and lessons from past programmes, 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.”
This prompts a careful look at any major policy decision or action taken by the Pakistani authorities since the staff-level agreement was approved and the executive board approval granted: the uploading of the IMF’s Corruption and Governance Diagnostic (CGD), a structural benchmark, on 20 November, a delay from the scheduled agreed release of the report in August. The report emphasised the need to implement the (i) Right to Information system which has a legal foundation but is not implemented (requests for RTI 2022-24 either remain under process or are closed, including NADRA (20 under process and 66 closed), Ministry of Interior (26 under process and 40 closed), National Accountability Bureau (16 under process and 43 closed), Ministry of Information and Broadcasting (21 under process and 38 closed), Federal Investigation Agency (15 under process and 43 closed), Federal Board of Revenue (23 under process and 31 closed), and National Assembly (16 under process and 30 closed); and (ii) urged judicial reforms including creation of standardised principles for judicial appointments and tenure for the appointment of judges and members of the Administrative Tribunals and specialised courts and the demonstration of compliance with those principles in all judicial appointments in courts dealing with commercial cases; improving efficiency of the Federal Administrative Tribunals and Special Courts; and strengthening integrity and conflict of interest provisions for all judicial personnel and review and increase transparency around payments and grants to judicial personnel.
The press release notes that the CGD report is a welcome step in accelerating governance reforms, adding that additional efforts should focus on state-owned entities’ governance reforms and privatisation, enhancing business environment and improving economic data and statistics but does not mention that the CDG did not highlight what is emphasised by the Transparency International and applicable to Pakistan; notably, “corruption is strongly intertwined with one of the biggest challenges humanity currently faces: climate change” though the 8th December press release does note that “the RSF arrangement is supporting efforts to strengthen natural disaster response.” However, one would have hoped that the press release had instead noted that there is a need to review the Fund’s RSF policy to make it more climate-specific rather than be a component of the EFF with a focus on macroeconomic and fiscal reforms.
And finally, the press release issued after the Board meeting reiterates the need for an “appropriately tight monetary policy stance… (and) should be maintained to ensure inflation remains anchored within the SBP’s target range,” which debunks the Finance Minister’s claim in parliament’s Finance Committee that the discount rate would be reduced by the end of the calendar year which, in turn, would explain the decline in the budgeted markup in spite of a rise in borrowing. Based on past precedents, the government may opt to further slash the budgeted development outlay, increase taxes (including the petroleum levy) and/or undertake innovative accounting. The press release yet again urges the State Bank of Pakistan to improve its communication to support this stance, no doubt fully cognizant of the fact that perception of independent economists, including Business Recorder’s, has been to link the decision to adjust the discount rate not to the rate of inflation but to the IMF’s diktat.
Copyright Business Recorder, 2025