Pakistan, a country having economic struggles since its inception, has sought IMF loans and bail-out programs multiple times. At the beginning of 1958, Pakistan went to IMF for the first time for assistance in the balance of payments crisis. Every time Pakistan has sought a loan from the IMF, it never went without being controversial. IMF always had stringent objectives and interests, which were never unveiled. With benefits, it also brings challenges. The challenges include public mistrust, integrity, and damage to welfare state status. The policymakers must reconsider the policies IMF always wants us to implement. It is also important to create strategies to reduce the reliance on IMF loans and build a sustainable economy for the future.
Various fiscal deficits have marked Pakistan’s economic journey, balance of payments crises, inflation, and foreign debts. To counter these challenges and stabilize its economy, Pakistan has sought IMF financial assistance from IMF more than 26 times. Through various programs like Extended Fund Facility (EFF), Stand-By Arrangements (SBAs), and structural adjustment programs (SAPs), IMF provides financial assistance and policy advice to help countries stabilize their economies and achieve sustainable growth.
Concerning Pakistan or any developing country, the IMF has always had a tough stance, often requiring structural reforms and austerity measures that can significantly impact the country’s economy and its citizens.
It may involve fiscal consolidation, monetary policy, and inflation control. It also involves increasing government revenues through tax reforms, reducing inefficient spending, and implementing fiscal austerity measures. From history, it is evident that the IMF has imposed some stringent policies that burden commoners and harmed the country’s overall reputation—for instance, cutting subsidies, increasing taxes, and rationalizing public spending. The IMF has urged Pakistan several times to privatize public institutions to improve their efficiency and reduce the burden on the government budget, which ultimately resulted in leasing airports, Pakistan Steel Mill, and public buildings. In the 9th review, Pakistan has increased its interest rate from 15% to 22%, the highest in Pakistan’s history. More must come, as policymakers and stakeholders are not done yet. Increasing inflation and mass migration by educated youth to foreign countries is alarming. It will have an adverse impact on the economy and well-being of the country.
The relationship with IMF has both pros and cons for Pakistan. In positive and short-term benefits, IMF programs helped Pakistan stabilize its economy, restoring the confidence of foreign investors and paving the way for future reforms. But the question is unanswered. What have we sought from the IMF programs? Negative aspects include cuts to social welfare programs, potential challenges to sovereignty, and long-term implications of policy conditions that may hinder sustainable development. The reforms Pakistan has done due to IMF have achieved some success, but they also incurred challenges due to socio-political consequences and resilience from vested interests.
Pakistan’s economic interests are also motivated by the global economic trends. With the changing dynamics of shifts, Pakistan must understand and act accordingly. Pakistan must find alternative strategies to reduce its dependence on IMF loans. These may include diversifying the economy and means of generating capital, encouraging domestic investments through building trust by promoting local businesses, increasing tax revenue by making reforms in tax collection, promoting exports, encouraging foreign direct investment can bring in capital, technology, and expertise, and collaborating with the private sector through PPPs can help fund infrastructure projects and provide essential services without putting additional pressure on the government’s finances.
Building a sustainable and resilient economy will enable Pakistan to mitigate future financial crises effectively.
Nothing in the economic policies has given long-term benefits. IMF has always been the first and only option for strengthening the economy. Populist and imprudent moves by most of the policymakers have done a lot of damage to the state’s well-being and economic structure. Whenever Pakistan finds it challenging to balance payments, it seeks the IMF’s assistance and comes up with a list of reforms but never thinks of any alternative means.
The IMF has played a significant role in Pakistan’s economic journey, providing financial assistance and policy guidance during challenging times. While these engagements have been instrumental in stabilizing the economy and implementing necessary reforms, they have also posed challenges regarding sovereignty, social welfare, and sustainable growth. Pakistan must carefully navigate its IMF relationship, considering the long-term implications for its economy and citizens. Looking ahead, Pakistan should focus on reducing its reliance on IMF loans by adopting alternative strategies and building a sustainable and resilient economy. By staying aware of global economic trends and adapting its policies accordingly, Pakistan can strengthen its economic position and forge a prosperous and self-reliant future. The IMF can continue to be a valuable partner in this journey, provided that its assistance aligns with Pakistan’s long-term economic objectives and social welfare goals.
The Author is a Defence and Strategic Studies scholar at Quaid i Azam University Islamabad. He is a cyber security intern at the Institute of Regional Studies (IRS) Islamabad. His research focus includes regional security challenges.