Why does Pakistan repeatedly turn to the International Monetary Fund for economic stabilisation? More importantly, why do many of the reforms demanded under IMF programmes not originate from Pakistan’s own policymakers?
The IMF does not literally prepare Pakistan’s budget. Pakistan’s government remains responsible for framing and approving it. But repeated dependence on IMF financing inevitably constrains fiscal policy. Pakistan’s latest IMF programme requires fiscal consolidation, revenue mobilisation, reduction of tax expenditures, expenditure controls and structural reforms.
For FY2026-27, the programme targets an underlying primary surplus of 2 per cent of GDP and calls for additional revenue measures.
This raises a more fundamental question: why should Pakistan need an external lender to insist on reforms that are clearly in Pakistan’s own national interest?
The figures show how limited the country’s fiscal space has become. Pakistan’s federal budget for 2026-27 is about Rs18.77 trillion, while debt servicing alone consumes roughly Rs8 trillion. Development spending remains a fraction of this amount. The figures demonstrate that a large part of the national budget is already committed before governments can meaningfully address development needs.
But the problem is not simply a shortage of money. It is also how the country raises revenue, distributes economic privileges and manages public resources. Pakistan’s own tax system provides an important example. The IMF continues to call for reducing tax expenditures and broadening the revenue base. Yet Pakistan continues to provide exemptions, concessions and preferential treatment that reduce the potential tax take. The issue is not whether every exemption is unjustified; some may serve legitimate economic or social purposes. The question is whether each concession can withstand public scrutiny when ordinary citizens are repeatedly asked to bear a greater tax burden.
The issue of privilege is not new. The UNDP’s Pakistan National Human Development Report estimated in 2021 that privileges enjoyed by the country’s elite amounted to Rs2.66 trillion, equivalent to around 8 per cent of GDP. The report examined privileges associated with powerful economic and institutional groups. This was a historical estimate, not a current 2026 calculation, but it illustrates the scale of preferential treatment that has existed within Pakistan’s economic structure.
The question today should therefore be straightforward: before imposing another burden on the ordinary taxpayer, has the state comprehensively reviewed the privileges available to powerful groups?
This principle should apply across the board—to politicians, senior bureaucrats, judges, the establishment, large businesses and other influential sections of society. There is nothing inherently wrong with reasonable salaries or legitimate institutional benefits. Judges, civil servants, parliamentarians and members of the security establishment perform important functions. But when the government asks citizens to accept higher taxes, expensive electricity and reduced purchasing power, every significant privilege funded directly or indirectly by the public exchequer should be capable of being justified.
Pakistan’s state-owned enterprises provide another example of a problem that has been known for years. According to the government’s FY2025 SOE report, aggregate losses of loss-making state enterprises stood at Rs832.8 billion, while the overall SOE portfolio recorded a net adjusted loss of Rs122.9 billion. These are not newly discovered problems. Successive governments have known which enterprises are inefficient, which require restructuring and where public money continues to be consumed.
The same question applies to governance and corruption. Pakistan has ministries, divisions, regulatory authorities, tax departments, audit institutions, provincial administrations and enforcement agencies. It also has a large and experienced bureaucracy. Why, then, do the same structural problems repeatedly return?
The IMF’s own Governance and Corruption Diagnostic for Pakistan provides an uncomfortable answer. It identifies persistent weaknesses in governance, complex and opaque regulations, discretionary enforcement, limited transparency, rent-seeking and regulatory capture. It also points to vulnerabilities in taxation, customs and the management of public resources.
These findings should not simply be used to blame the IMF. They should compel Pakistan’s own policymakers to ask why these problems have survived successive governments.
If policymakers know that the tax base is too narrow, why has it remained narrow? If tax expenditures and exemptions are known, why are unjustified ones not eliminated? If loss-making public enterprises are identified year after year, why are they not effectively restructured? If governance weaknesses are documented, why does administrative reform remain incomplete? And if these hurdles are known, who is responsible for removing them?
This is where the role of the executive and administration becomes critical. Governments do not exist merely to collect taxes, prepare budgets and implement externally agreed programmes. Their fundamental responsibility is to identify national problems, formulate solutions and implement them in the public interest.
Pakistan cannot achieve economic sovereignty merely by criticising the IMF. Nor can it achieve it by repeatedly negotiating another programme. Economic sovereignty will come when Pakistan can generate sufficient domestic revenue, control unnecessary expenditure, reform loss-making public enterprises, improve governance, eliminate unjustified privileges, expand exports, attract investment and manage its resources efficiently.
The real issue, therefore, is not whether the IMF is dictating Pakistan’s budget. The deeper issue is why Pakistan repeatedly reaches a point where an external institution has to insist upon reforms that its own policymakers have long known are necessary.
The ordinary citizen has already made sacrifices through taxation, inflation and declining purchasing power. The next phase of reform should not simply ask him to sacrifice more. It should also require those at the helm of affairs to examine the privileges, inefficiencies and institutional failures that have contributed to the country’s economic predicament.
A country becomes economically independent not when it stops listening to the IMF, but when it develops the capacity and political will to solve its problems before it needs the IMF.
The writer can be reached at mujtabanodeel@gmail.com.
