Saying goodbye to the Fund would require political commitment and a well-executed agenda of bold economic reforms.
Pakistan finds itself back in the arms of the IMF — for the 25th time. The much-anticipated $7 billion Extended Fund Facility (EFF), stretched over 37 months, offers temporary relief to a shaky market. Since the July staff-level agreement, all eyes have been fixed on the Fund, fearing that any further delay could tip the fragile economy into chaos. This programme is, therefore, a lifeline — designed to ease Pakistan’s debt repayments that can unlock global financing opportunities.
The government has been quick to hail this deal as a major victory, parading it as the ultimate solution to Pakistan’s economic woes. But here’s the question on everyone’s mind: is this really the last IMF programme?
Spoiler: it’s unlikely.
Yes, falling global oil prices, declining inflation, and associated significant cuts in policy rates provide a conducive environment to implement the programme but let’s not get ahead of ourselves. The idea that Pakistan can simply replace IMF loans with commercial or friendly-country borrowing is incredibly shortsighted. It is also not an exit strategy. Sustainable exits don’t come wrapped in neat packages — they require a stable, resilient economy, which Pakistan has yet to build.
This is what makes exiting so complex — it’s not a one-time fix, despite what the government might suggest. There’s no doubt that Pakistan desperately needs to break free from these recurring IMF programmes. We’ve been through enough. But rushing towards a quick exit without a concrete, long-term strategy is just as dangerous as entering the programme for the 25th time.
Pakistan’s long, tumultuous relationship with the IMF stretches over seven decades, a love-hate affair that seems to recur every three years like clockwork. Saying goodbye to the Fund, therefore, requires political commitment and a well-executed agenda of bold economic reforms. It will take time. This is a journey, not a simple case of shutting the window and closing the door.
The roadmap
To build a strong foundation for economic governance and growth, we must first secure a commitment from all political parties at both the federal and provincial levels. Only with this collective commitment can Pakistan drive forward effective policies and hope to truly chart its own course, free from the financial handcuffs of external dependency.
Key reforms like privatising state-owned enterprises (SOEs), taxing the agriculture, retail, and real estate sectors, and eliminating non-productive subsidies demand consensus and endurance. A standing parliamentary committee could cement this unity. Exiting the IMF isn’t about scoring political points — it’s about securing the nation’s economic future.
In order for this to happen, all political parties, especially the ruling coalition, must rise above politics for true success. A shared cabinet will be the first test of their unity. It will be important to observe how far the coalition goes in shouldering the responsibility and burden of this programme.
We also need an honest, transparent assessment of why we keep returning to the IMF, despite repeated promises of “the last IMF programme.” What made those exits unsustainable? Identify the root causes and implement corrective measures over the next three years while carrying out the current programme. One quick advice: steer clear of the usual suspects for this evaluation — they’ve led us nowhere, and they’ll take us nowhere.
An honest admission of our problems is the bare minimum to start real change. Take public debt, for instance. A clear acknowledgement that it’s become unsustainable is the signal the world needs to see to believe in our commitment to overcoming these hurdles. Relying on friendly deposits, rollovers, and expensive commercial loans to patch up financial gaps is like taking Panadol for a deep wound — it offers temporary relief but never addresses the root cause. What we need is real surgery; a comprehensive, lasting solution to heal the economy.
More importantly, we must outline a definitive timeline for graduating from the IMF — one that realistically spans six to 10 years. While this may seem slow to the hawks, it is the only pathway to a lasting exit. The first three years will focus on the current programme, laying the groundwork for departure. The next three years will be dedicated to implementing essential policies and reforms, followed by an additional three years to solidify our exit. If we are truly committed to parting ways with the IMF, we might require one more programme. Remember, Brazil navigated two successive three-year IMF programmes — meant to achieve a sustainable exit — before achieving a fund-free economic journey.
Forge a partnership with the IMF and development allies to create a strategic exit plan. The IMF will be pivotal in securing a sustainable departure, and the government must engage with the global lender to devise a clear graduation strategy. Bring in development partners like the Asian Development Bank (ADB) and the World Bank (WB) to help implement the exit. Collaborate with partner nations to consolidate the exit. Brazil embraced this strategy, and it paid off.
Draw lessons from global experiences: a plan to boost trade, pinpoint critical sectors for economic activity, attract investment, and transition to green energy is crucial for a sustainable exit. Traditional industries like textiles and manufacturing may find it challenging to stay competitive in the next three to six years due to IMF-imposed conditions and rising energy costs, limiting their role in our exit strategy. Instead, we should focus on prioritising high-potential sectors such as agriculture and IT, where growth opportunities and innovation await.
Every choice demands a meticulous policy framework. Take the IT sector, for instance. To prioritise the tech sector, we must eliminate internet closures, global platform bans, and large-scale access blockages to essential communication tools like WhatsApp. Successful global exits, such as Brazil’s, provide valuable insights, particularly for the agriculture sector. However, lessons learned from these success stories must be tailored to fit our local context for maximum impact.
Implementing the current IMF programme in both letter and spirit will be the ultimate litmus test. If the ruling parties can truly embrace the reform agenda, Pakistan’s journey toward eliminating dependency on the IMF can begin. The first step is to rise above politics surrounding the IMF. Whether in the cabinet or not, ruling parties must collectively shoulder the burden of tough, transformative reforms.
Learning from past mistakes
We cannot afford to repeat the mistake of prioritising low-growth stabilisation. The road to a sustainable exit demands a focus on fostering genuine economic growth. With a population growth rate of 2.55 per cent and 60pc of our citizens aged 15-19, relying on ad hoc stabilisation by slowing the economy to a mere 2pc growth rate is not the way to go. History has shown us that macroeconomic stabilisation at the expense of growth has failed us 24 times — and it will inevitably fail us a 25th time.
The government, therefore, must adopt a new mindset this time around. As it implements the reforms outlined in the programme, it should focus on identifying and strengthening avenues for generating economic activity. By supporting the IT sector, modernising agriculture, and fostering entrepreneurship skills, we can ignite economic growth that creates jobs and livelihoods. This will necessitate a coherent policy framework that cultivates a conducive environment for each sector. Stabilisation should never come at the expense of the most vulnerable in our society.
Drawing inspiration from Brazil’s remarkable turnaround, Pakistan’s sustainable exit from the IMF hinges on achieving an average growth rate of 5pc over at least a decade. This level of growth is imperative for generating meaningful jobs while maintaining low and stable inflation. A favourable current account, supported by high GDP growth, is at the core of Pakistan’s quality exit.
Achieving this goal requires a consistently executed agenda of reforms aimed at broadening the tax base — changes in the National Finance Commission (NFC) included — attracting Foreign Direct Investment (FDI), and reducing oil imports by enhancing the efficiency of energy production and distribution while shifting toward green energy. Additionally, the agenda must prioritise reducing public debt to 60pc of GDP — as a first step — anchored in a growing economy, alongside strict enforcement of the Debt Limitation Act. Improving our debt profile, along with responsible borrowing and prudent utilisation of debt, will be essential for sustainable progress.
Ultimately, a sustainable exit is unattainable without broad public ownership of the reform agenda. The government must cultivate this ownership by implementing fair taxation, ensuring equitable resource allocation, and enhancing social safety nets to protect citizens from the adverse effects of stabilisation. Transparency in public borrowing and debt management, coupled with effective and inclusive public service delivery, will be crucial in earning the trust and support of the people.
