IMF Calls for Urgent Policy Reforms in Pakistan's Economic Landscape

The IMF highlights Pakistan's lag in living standards compared to regional peers, urging immediate policy reforms. Over a decade of sponsored programs, underlying challenges persist, necessitating sustainable reforms. Key measures include imposing duties and amending laws, with success hinging on governmental commitment to implementation.

In a critical alert to Pakistan's economic policymakers, the International Monetary Fund (IMF) has stressed the urgent necessity for sweeping reforms. A report by The News International reveals Pakistan's declining performance in living standards compared to its regional peers, with significant setbacks in income per capita, competitiveness, and export success.

Reviewing its sponsored programs from the past decade, the IMF noted persistent challenges and recommended a deeper institutional commitment. Throughout these years, Pakistan engaged in three upper credit tranche arrangements and utilized a Rapid Financing Instrument amidst obstacles such as the COVID-19 pandemic and devastating floods.

Initial progress under these programs was achieved but proved unsustainable, causing renewed economic imbalances. The IMF suggests reforms such as a 5% excise duty on fertilisers and pesticides in the 2025-26 budget and amendments to the Civil Servants Act by February 2025 to bolster anti-corruption efforts. The government aims to stabilize circular debt in the fiscal year 2025 through strategic tariff hikes.

The IMF report underscores that Pakistan's debt repayment ability critically depends on instituting these reforms and securing timely external financial support. The findings chart a path for Pakistan to regain economic stability and enhance its standing among regional counterparts. The eventual success of these measures will heavily rely on the government's dedication to their effective implementation.

(With inputs from agencies.)