Pakistan’s repeated return to the IMF is not the result of bad luck, external conspiracies or temporary global shocks. It is the predictable outcome of deep structural political and economic weaknesses that have accumulated over decades.
Our economy has failed to expand its productive and export capacity to meet the needs of a rapidly growing population. We import more than we export, borrow more than we earn and collect far less revenue than a modern state requires. IMF dependence, therefore, is not imposed on Pakistan but produced at home.
This diagnosis may be uncomfortable, but it is also liberating. If the problem is structural, the solution lies within our control. Genuine economic sovereignty will not come from managing crises or negotiating one IMF programme after another, but from expanding Pakistan’s productive base. While stabilisation is necessary to treat symptoms, the cure lies in addressing the disease itself. In simple terms, Pakistan must expand its production capacity, competitiveness and export capacity. There is no sustainable alternative.
This is precisely the logic underpinning URAAN Pakistan and its National Economic Transformation Plan. The aim is not short-term relief, but long-term resilience.
Much of the current debate on exiting the IMF remains trapped in a false binary. We are told that fiscal austerity is the only responsible response to economic stress. Fiscal discipline is essential, but it must not be mistaken for economic suffocation. Austerity may temporarily compress deficits, but it does nothing to expand the economy’s capacity to generate income, exports and revenue. Prolonged austerity ultimately hollows out the economy by underfunding the very sectors that drive productivity and growth.
Development expenditure, by contrast, builds the foundations of future fiscal sustainability. Strategic public investment in infrastructure, energy, water, digital connectivity, education, skills and research raises productivity, crowds in private investment, and expands the tax base. Development spending is not the enemy of fiscal discipline; it is the precondition for it. Without it, Pakistan remains trapped in a low-productivity, low-export, low-revenue cycle that perpetuates external dependence.
The data speaks for itself. Out of the total federal current expenditure of Rs16,286 billion, nearly half – Rs 8,207 billion, or 49 per cent – is consumed by debt servicing. Defence accounts for about 16 per cent, while grants and transfers, including BISP, take another 12 per cent. The entire federal government operates on barely 6.0 per cent. Federal development spending, PSDP, has declined sharply from 2.8 per cent of GDP in 2018 to just 0.9 per cent in 2024. This is not an economy living beyond its means; it is an economy under-investing in its future.
A critical weakness in Pakistan’s development model has been the imbalance between physical infrastructure and human development. In the past, governments have prioritised visible infrastructure projects with quick political dividends, while neglecting social-sector investments that drive long-term productivity.
No country can aspire to sustained prosperity with a literacy rate of 63 per cent, nearly 40 per cent of children stunted, a population growth rate of 2.55 per cent, and female labour force participation stuck at around 23 per cent. These are not just social indicators; they are binding economic constraints. URAAN Pakistan’s 5Es framework addresses this vulnerability.
Following the 18th Amendment, provinces are primarily responsible for education, health and social development. Yet weak local governance and the absence of empowered district-level institutions have undermined delivery. The strategic importance of human capital requires a robust district-level local government mechanism and a coordinated national effort. At present, development planning is fragmented, overly centralised in provinces and poorly aligned with federal and provincial priorities.
URAAN Pakistan, therefore, proposes revitalising the National Economic Council (NEC) as the apex constitutional forum for harmonising federal and provincial strategies, budgets, and accelerating reforms. Human development cannot be treated as a provincial afterthought; it must be a national economic priority.
Pakistan’s heavy debt burden is ultimately the result of chronically weak revenue and export performance. This is why tax reform lies at the heart of the government’s agenda. The restructuring of the FBR, technology deployment and improved enforcement have begun to show results. Given IMF programme constraints, initial efforts focused on deepening compliance within the existing tax base, which placed a disproportionate burden on compliant taxpayers.
The next urgent phase is to broaden the tax base – bringing untaxed sectors, incomes and transactions into the tax net to restore fairness and sustainability. Encouragingly, Pakistan’s tax-to-GDP ratio has increased to 10.3 per cent in FY2025, up from 8.8 per cent the previous year. This progress must now be institutionalised through political resolve and continuity.
At the same time, business facilitation reforms are underway: digitisation of registration and licensing, single-window customs, streamlined regulations and automation of dispute resolution. URAAN Pakistan aims to further reduce red tape and regulatory overlap to create a genuinely pro-investment environment.
Stabilisation alone will not free Pakistan from IMF dependence. A durable exit requires export-led growth. Pakistan’s boom-and-bust cycles are rooted in a structural imbalance: we consume dollars through imports but fail to earn enough through exports.
URAAN Pakistan places exports at the centre of national transformation, with a clear ambition: to place Pakistan on a path to a trillion-dollar economy by 2035 and a $3 trillion economy by 2047. This demands a fundamental paradigm shift from import substitution to global competitiveness.
The strategy rests on three interlinked frontiers. First, transforming foundational sectors. Pakistan must move from low-value assembly to higher-value manufacturing, and from exporting raw agricultural and mineral commodities to exporting processed, branded and traceable products. Second, investing in human capital for global markets. Pakistan’s youth bulge is a strategic asset if properly skilled. This includes scaling IT and digital exports, upgrading human resource exports from low-skilled labour to certified professionals, and unlocking creative industries such as film, design, gaming and digital media.
Third, mobilising neglected assets. Pakistan’s long coastline offers immense potential in fisheries, aquaculture, maritime services, and logistics. Similarly, modern tradable services can generate high export earnings with strong job creation and low foreign-exchange intensity.
URAAN Pakistan anchors export growth in eight priority drivers aligned with comparative advantage and global demand. One, industry and manufacturing will transition to higher value-added production through industrial clustering, technology upgrading, standards compliance and regional value-chain integration.
Two, agriculture will move beyond primary commodities towards processed, branded and traceable exports supported by cold chains, certification systems, and agri-industrial zones. Three, modern services offer scalable export growth with strong employment effects.
Four, IT and digital services will be scaled through investment in skills, infrastructure, global market access and regulatory facilitation. Five, mines and minerals will be developed to unlock Pakistan’s estimated $7 trillion potential, prioritising transparency and downstream processing rather than raw extraction.
Six, manpower exports will pivot from low-skill migration to certified, high-value human capital aligned with global demand. Seven, the blue economy will be fully leveraged along Pakistan’s coastline. Eight, creative industries, from fashion and design to gaming and digital content, will be harnessed as a new export frontier where talent and culture converge.
Supporting these drivers requires export-enabling reforms: fast-tracking tax refunds, rationalising input tariffs, expanding export finance, improving logistics and strengthening quality certification and skills.
Economic transformation cannot be delivered through outdated administrative structures. URAAN Pakistan, therefore, has recommended restructuring of ministries dealing with productive sectors and reorienting the foreign service toward economic diplomacy. The fact that Pakistan’s export basket and markets have remained largely unchanged for three decades is evidence of institutional inertia.
A comprehensive civil-service reform package has been finalised to promote specialisation, strengthen performance management, leverage technology and enhance accountability. Without state capacity reform and modernisation, even the best economic strategies will falter.
Pakistan’s greatest obstacle has not been a lack of ideas or ambition, but political instability and repeated policy reversals. Reforms are launched, disrupted, reversed and relaunched. Development, however, demands continuity. The experience of successful countries shows that transformation is a steady, 15-year journey on a consistent reform path.
China expanded productive capacity through a gradualist, state-led approach. South Korea exited its IMF programme ahead of schedule after the 1997 crisis by restoring stability while restructuring firms and placing exports at the heart of recovery. Vietnam combined fiscal discipline with export diversification and global value-chain integration. Indonesia paired consolidation with institutional and energy reforms to reduce long-term vulnerabilities.
The lesson is clear: sustainable IMF exit is not achieved by suppressing development ambitions or managing decline. It is achieved by expanding exports, raising productivity, mobilising domestic resources, and reforming institutions. An IMF exit cannot be engineered with a shrinking economic pie; it requires the vision and courage to expand it.
Exiting the IMF is a milestone, not the destination. The real question is where Pakistan intends to stand in 2047, when it marks its centennial. The true national challenge is Maarka-e-Taraqi – the race for productivity, innovation and prosperity in a fiercely competitive region.
Just as Pakistan demonstrated unity and resolve in Maarka-e-Haq, it must now summon the same discipline, coherence and national purpose for economic transformation. This requires peace, political stability and continuity of economic policy across electoral cycles. Economic transformation rewards patience, discipline and endurance.
Exiting the IMF through economic compression would be fragile and temporary. Exiting through productivity, competitiveness, exports, tax reform and policy continuity would be durable. It is the harder path, but it is the only credible one.
The writer is the federal minister for planning, development, and special initiatives. He tweets/posts @betterpakistan and can be reached at: [email protected]
