The latest staff-level agreement with the IMF deserves to be read in Pakistan as a welcome signal, despite what social media warriors and propagandists’ accounts operating across the border would have one believe. Once approved by the Fund’s board, it would release about $1.2 billion under the Extended Fund Facility and another $210 million under the Resilience and Sustainability Facility. For an economy still carrying the ghosts of external vulnerability, that matters because it helps preserve confidence, supports reserve adequacy, and tells markets that fiscal correction has not gone off the rails.
There’s a lot on the ground that calls for cautious optimism. Inflation, though still uncomfortable for households, has fallen far from crisis levels. The external account also improved materially in FY25, when Pakistan posted its first current-account surplus in 14 years, helped in large part by record workers’ remittances. All of this shows that stabilisation, when consistently pursued, can restore room for policy.
The issue for Pakistan, nonetheless, is that stabilisation has too often been treated as the finishing line when it is only the starting point. The IMF wants a FY26 budget primary surplus of 1.6 per cent of GDP and an underlying primary balance of 2 per cent of GDP in FY27. Those targets are demanding, though they are not unreasonable for a country that has repeatedly financed structural weakness with debt and postponed reforms until the next crisis forced its hand. The larger question is whether this programme will finally be used to change the domestic political economy that keeps sending Pakistan back to the Fund. That is where the real argument lies. Pakistan’s recurring dependence on IMF programmes cannot be explained by external shocks alone, though those shocks have been severe. The 2022 floods affected 33 million people, and the World Bank says poverty had climbed to 25.3 per cent by 2024, with 13 million more Pakistanis pushed below the poverty line.
Nevertheless, the backbreaking burden remains poorly distributed because the state still finds it easier to tax what is documented than what is politically protected and easier to announce reforms than to legislate against privilege. That is why this agreement should be defended and challenged at the same time. Defended, because IMF support is serving a useful purpose in stabilising Pakistan’s economy, restraining inflation, checking wasteful spending, and pressing the system toward tax reform that should, if honestly pursued, work for the broader public rather than for narrow intermediaries. Challenged, because no programme can substitute for domestic reform that outlasts the review cycle.
Pakistan’s public debt reached about Rs80.5 trillion in FY25, roughly 70 per cent of GDP, and the power sector remains a standing reminder of unfinished business. Sustained implementation of all that has been discussed to the point of repetition cannot be kicked down the dusty road any longer. Pakistan has heard that line before. This time, it has to mean that the country is preparing to exit the cycle, not merely manage it till the next round.
