The year 2025 stands out as a critical period for Pakistan’s economy. The ongoing collaboration with the International Monetary Fund (IMF) plays a significant role in ensuring the country’s economic stability while also facilitating the implementation of structural reforms. The IMF provides a framework to help Pakistan address various structural and financial challenges.
Pakistan has long been cooperating with the IMF to stabilize its economy. Besides offering financial advice, the IMF has been instrumental in implementing structural reforms. Pakistan’s Ministry of Finance and Revenue has announced that an IMF mission has arrived in the country to carry out a diagnostic exercise. In 2018, the IMF established a framework to assess weaknesses such as governance and provide reports. Under this framework, the Pakistan review has been conducted with the aim to enhance the public sector’s efficiency. The mission tries to assist in improvement by recommending reforms in areas such as fiscal management, central bank operations, and financial sector regulation.[1]
During its visit to Pakistan, the IMF delegation is examining governance risks. The IMF specifically demands improvements in the utilization of public resources and transparency within state institutions.[2] It has requested the Pakistani government to strengthen budget discipline and ensure the transparent use of development funds through a strict monitoring mechanism. These mechanisms are expected to enhance oversight of public expenditures and enable more efficient utilization of public resources in Pakistan. The IMF’s approach aims to prevent past instances of resource mismanagement. However, implementing such monitoring systems may impose an additional burden on local administrations and bureaucracy. Furthermore, the success of these reforms depends heavily on political will and societal support. In this context, the IMF’s technical assistance and the oversight of the international community play a crucial role.[3]
The reforms implemented with the assistance of the IMF are expected to enhance Pakistan’s macroeconomic fundamentals by leaps and bounds. The country has made considerable progress in containing inflation and fiscal discipline, according to IMF officials. More particularly, tax reform and regulatory steps in the energy sector have been viewed as essential provisions towards stability in the economy of the country. The Pakistani government’s attempts at broadening the tax base are a fundamental element that plays a role towards economic growth. Besides, rationalization of government expenditure is essential for ensuring fiscal discipline. Reforms in the energy sector are also a significant step toward strengthening Pakistan’s financial balance. Regulations aimed at improving energy efficiency and reducing costs will contribute to the economy’s sustainable growth in the long run.
It is reported that the IMF appreciates the determination of the Prime Minister of Pakistan to make the economy stronger. The IMF appreciates the Prime Minister’s intention to expand the tax base and optimize public spending. These steps have been viewed as positive moves towards making Pakistan economically sound.[4]
However, Pakistan’s economic recovery process faces numerous challenges. One of the most significant factors hindering the country’s economic growth is its external debt burden. High external debt, coupled with rising interest costs, is straining the country’s financial situation. Additionally, Pakistan’s current account deficit and high unemployment rates have negative impacts on economic growth. The IMF is developing various mechanisms to help alleviate Pakistan’s debt burden and support the implementation of a sustainable growth strategy through its financial assistance. In this process, political stability and societal support are considered crucial. The necessary reforms to reduce external debt and support economic growth are not always easily accepted by the local population and political forces. In particular, tax increases and energy price adjustments may negatively affect purchasing power and have the potential to cause social unrest.
The implementation of these reforms is likely to face social opposition and political resistance. In particular, tax increases and energy price adjustments have the potential to negatively impact the purchasing power of the public. Therefore, it is believed that the government should also introduce social protection programs while implementing these reforms.
The year 2025 presents Pakistan’s economy with both challenges and possibilities. The ongoing collaboration with the IMF is enabling the nation to achieve considerable progress towards economic transformation. Political stability, social consensus, and global cooperation are of the utmost importance if Pakistan is to succeed in its long-term journey of economic revitalization. Though the economic reforms supported by the IMF will help in long-term restructuring of the nation’s economy, social engagement and political consensus are crucial to the success of this project. In this context, Pakistan’s relationship with the IMF is not just significant as a source of finance but also as an instrument of economic reform.
[1] “IMF mission visiting Pakistan to review governance, corruption risks: finance ministry”, The News, https://www.thenews.com.pk/latest/1281048-imf-mission-visiting-pakistan-to-review-governance-corruption-risks-finance-ministry, (Accessed Date: 13.02.2025).
[2] Ibid.
[3] “IMF Pushes for Stricter Budget Monitoring and Live Tracking of Development Funds”, ProPakistani, https://propakistani.pk/2025/02/13/imf-pushes-for-stricter-budget-monitoring-and-live-tracking-of-development-funds/, (Accessed Date: 13.02.2025)
[4] “IMF supports Pakistan PM’s decisive actions for betterment of economy”, The Hindu, https://www.thehindu.com/news/international/imf-supports-pakistan-pms-decisive-actions-for-betterment-of-economy/article69211157.ece, (Accessed Date: 13.02.2025).
