THE mismanagement of Pakistan as a polity by its ruling elite has landed the country in periodic crises. These crises have been as much political as economic. The resulting economic turmoil has necessitated 25 IMF programmes. While Pakistan’s elites are to blame for their recidivist, incorrigible (and extractive) nature, each interaction with the IMF has compounded the country’s structural problems rather than provide a pathway to sustainable growth and development. The latest example is the ongoing programme where the IMF has endorsed the government’s free-spending fiscal profligacy while imposing the burden of adjustment on ordinary Pakistanis. The carte blanche on spending comes on top of repeated forbearance of slippages on structural and institutional reform. In doing so, the Fund has failed its basic duty-of-care responsibility to ordinary citizens of a member country.
As noted in my article in this newspaper a few weeks ago (‘Trapped in sham austerity’), since 2023 under the aegis of the IMF, Pakistan has recorded the largest fiscal adjustment in its history — cumulatively amounting to 5.6 per cent of GDP. However, 73pc of this adjustment has come from revenue measures, with the burden falling disproportionately on already-taxed formal firms, salaried individuals and the less-affluent via petroleum levies and indirect taxation.
At the same time, the government’s extravagant spending has received a free pass from the IMF. Consolidated public expenditure, federal as well as provincial, has risen by 60pc (FY23–FY26 budgeted) in nominal terms. Non-interest expenditure has increased by 70pc, with personnel-related spending ballooning from Rs3.7 trillion to Rs5.9tr, a 59pc increase. Political patronage-driven and pork barrel-ridden development spending has shot up by 64pc. A large part of the government spending since 2022 has been in the nature of political bribes to different institutional constituencies. Yet, the IMF has looked the other way.
(By way of comparison, under the fiscal austerity programme in Greece post-2009, public sector employment was cut by 20pc, and public sector wages and pensions by 15-40pc).
By endorsing sham austerity, IMF has failed its duty-of-care responsibility to Pakistanis.
The combination of massive tax mobilisation, cuts in subsidies and the rupee depreciation has pushed 114 million Pakistanis (44.7pc of the population) below the poverty line, according to the World Bank’s estimate as of June 2025. Unemployment stood at 18.8m, according to the seventh Population and Housing Census 2023, with at least 6.7m youth unemployed. Real wages of a representative sample of worker categories have declined by 27pc since March 2022. More Pakistanis are food-insecure now than in 2022 (at a quarter of the population).
The crafting of the programme design by the IMF in a manner that has shifted virtually the entire burden of adjustment onto tax-compliant firms and ordinary Pakistanis, while protecting the government’s extravagant spending on the manufacturing of a new political order, might seem like a ‘technocratic’ oversight at first, but it is anything but. It is a calculated and politically motivated move. The IMF is no innocent bystander or uninvolved observer. It reviews and signs off on the aggregate fiscal framework and major expenditure envelopes. To give such a glaring immunity to fiscal profligacy while overseeing the ‘austerity’ programme smacks of complicity.
This should not come as a surprise. The IMF plays an important role as an instrument of US foreign policy interests. In Pakistan’s case, much like Egypt or Iraq post-2003, the Fund has operated in a system-legitimising and regime-supporting role. This is especially evident in its Pakistan programmes since 2022.
The political undertones of IMF programmes extend beyond a willingness to lend, an accommodative programme design, generous leeway in conditionality, or forbearance of repeated slippages. An important element involves narrative formation. The Fund has consistently played up even tepid progress on long-promised reforms (“strong programme implementation”, “Pakistan’s policy efforts […] have delivered significant progress”), while playing down lapses in key commitments. Only a passing reference is made to the human cost of programme conditionality, especially to the significant rise in the poverty rate.
The sui generis treatment of Pakistan by the IMF (documented in the first report of the Independent Evaluation Office in 2002, and captured by the coining of the term ‘Pakistan treatment’ at the executive board in 2008), is fully reflected in the recent Governance and Corruption Diagnostic conducted by the Fund. As noted in a scathing critique by the independent think-tank GTTN, the GCD report’s “enforcement mechanisms are weak, politically sensitive reforms are diluted or deferred, subnational governance is under-examined, and institutional independence is insufficiently secured”. Milestone reforms such as those relating to NAB, the SIFC and election filings by parliamentarians, among others, have been watered down or made meaningless via forbearance of lapses and timelines. This is completely contrary to the approach the IMF took towards the GCD reports of Sri Lanka and Ukraine, for example, where a stringent, timebound action plan was incorporated into programme conditionality.
Too many Pakistani commentators, including competent and seasoned economists, fail to grasp the nuance between Pakistan’s recidivist habits as a chronic patient, and the duty-of-care responsibility of the IMF as the country’s ‘doctor’. Any critique of IMF programme design is met with the standard trope that ‘Pakistan is to blame and not the IMF’. Pakistan is indeed responsible for spending almost 35 years in IMF care, but the Fund’s prescriptions, their sequencing, the many needed institutional and structural reforms it did not include, as well as its forbearance and repeated largesse over multiple programmes, have violated the foundational principle of primum non nocere (‘first, do no harm’).
The IMF’s forbearance has not only weakened Pakistan’s credibility but also the credibility of its own programmes as an important external commitment device. In addition, the IMF’s signalling of Pakistan making “significant” progress in structural reforms, and being on a sustainable debt trajectory, is misleading for financial markets, and marks a serious lapse of fiduciary responsibility.
While Pakistan is to blame for where it is, the IMF bears culpability via acts of commission as well as omission, for keeping it there.
The writer has been a member of several past economic advisory councils under different prime ministers.
Published in Dawn, March 5th, 2026
