This week’s approval of another IMF tranche of $1.2 billion for Pakistan will hardly make a difference to where it matters the most – the plight of the country’s mainstream households.
It may be the case that the IMF’s ongoing loan of $7 billion, has helped Pakistan in recent years to avoid an international default on its foreign debt repayments. But remaining afloat will hardly lift Pakistan’s prospects, at a time when the country needs to set a qualitatively new direction for its future.
The latest news from the IMF has coincided with fresh warnings over Pakistan’s growing international trade deficit. Last month (November) alone, the deficit widened by 33 per cent to $2.86 billion compared to November 2024. The latest trade deficit for this November was driven by a drop in exports and a rise in imports. It also coincided with Pakistan’s economic growth remaining largely subdued.
A deeper analysis of Pakistan’s economic trends must conclude that without a critical lifeline extended by the IMF, Pakistan will inevitably return to the turbulence it faced at the beginning of this decade.
The additional economic pressure this year was triggered by widespread losses to Pakistan’s agriculture, caused by large-scale destruction to farms following heavy rainfall and floods during the summer. With forecasts predicting a significant rise in rainfall next summer, Pakistan’s agricultural journey is set to remain troubled.
A closer review of Pakistan’s economic outlook must also consider the dangerous possibility of another foreign-exchange crisis and the turmoil surrounding the rupee, unless the trade deficit is rapidly tamed. For this much-desirable end, it is vital to fundamentally alter Pakistan’s future direction.
A new vision for the future must be built upon resolving Pakistan’s internal political discord, which has rapidly fueled economic uncertainty in recent years. The cost to Pakistan from a continuing political divide has never been calculated in monetary terms. Yet, it is clear that internal political divisions have overshadowed long-term prospects for the economy.
On other fronts directly related to the economy, Pakistan must immediately suspend all of its infrastructure projects. Subsequently, a fundamental review of each project for building new roads or other brick-and-mortar projects must be carefully undertaken to assess their utility for Pakistan in the short to medium term.
Other, more fanciful projects, notably the planned glass-covered train service from Rawalpindi to Murree via Islamabad, must be shelved for the foreseeable future. The alternative of carrying this initiative forward will only testify to the present government remaining insulated from the worsening quality of life for Pakistanis across the board.
Pakistan can just not afford to assume further debt except for the most essential. Instead, critical and pressing needs such as population control or building safeguards against climate change must be adopted immediately. Towards this end, Pakistan needs to embrace two equally vital principles:
First, it is vital for Pakistan’s ruling class to finally accept that any initiative undertaken without a popular mandate risks being sidelined before long. Instead, building consensus among a diverse group of individuals becomes a challenge. But alternatively, once a consensus is achieved, moving ahead squarely becomes no more than just the new norm.
Second, any exercise that aims to lift Pakistan’s economic outlook must always accept that the country is still surrounded by unprecedented challenges. In this background, reviving the economy has become the biggest challenge as Pakistan seeks to overcome the multiple obstacles on this front.
But Pakistan’s journey will remain unsettled unless the country marks a swift change of direction. Given that a large part of Pakistan’s population remains uneducated, a rapid shift towards industrialisation remains the missing piece for the foreseeable future. But a new shift towards relative economic stability will make bold headway, only when the resources in the government’s custody unite to build progress together. This must mark the first vital step towards a revival of agriculture.
As large parts of Pakistan face the brunt of climate change this year, the writing on the wall is abundantly clear. Higher yields from agriculture will not only help to meet the domestic shortfall in key products. Such an eventuality will also support a new initiative to use key commodities for a bold entry into export markets worldwide.
In this journey towards stabilising the economy, it is essential to remember a number of steps that will work as essential prerequisites. At the same time, Pakistan must move decisively to revamp its tax collection system, long at the centre of disagreements. Pakistan’s ability to revamp its tax collection system clearly remains in doubt. For now, tax officials assigned to this area have frequently reported their failure to meet their collection targets.
Going forward, it is clear that the IMF’s review of Pakistan’s economic trends, in part, was driven by keeping Pakistan simply afloat. But the IMF failed once again in creating hope for the broad mainstream population of Pakistan that continues to suffer from belt-tightening.
The writer is an Islamabad-based journalist who writes on political and economic affairs. He can be reached at: [email protected]
