A Delicate Balancing Act

The successful conclusion of the first performance review of the IMF’s extended $7bn funding programme marks a positive development for Pakistan’s struggling economy. The end-of-mission statement acknowledges that “programme implementation has been strong,” with progress in critical areas such as fiscal consolidation, monetary policy, energy sector reforms, and structural adjustments aimed at sustainable growth. The IMF’s relatively accommodating stance, despite delays in certain benchmarks, signals confidence in the government’s commitment to reforms. However, the real challenge lies ahead as the government navigates future policy decisions amid political and economic pressures.
For now, the IMF has chosen to overlook some lapses and unmet targets. Whether this leniency continues will be determined once the Memorandum of Economic and Fiscal Policies is released and negotiations for the next budget take place. The flexibility granted in this review should not be misinterpreted as a long-term pattern; Pakistan’s economic managers must ensure that necessary reforms remain on track to avoid future roadblocks.
One of the most pressing concerns is the rising demand for rapid economic growth, spearheaded by influential real estate tycoons. Having previously secured lucrative tax amnesties and incentives during Imran Khan’s tenure, these stakeholders are now lobbying the current government for similar concessions. While their proposals may promise short-term economic activity, history has shown that such policies disproportionately benefit the elite while ordinary citizens bear the brunt of inflation and economic instability.
The government must resist the temptation to engage in another round of wasteful incentives for the real estate and construction sector. The economic price of such short-sighted policies has already been paid by millions struggling with rising costs of living, and a repetition of past mistakes would be both politically and economically disastrous. Instead, the focus should remain on fundamental restructuring aimed at attracting foreign private investment, enhancing productivity, and increasing exports. These are the pillars of sustainable, long-term growth rather than speculative bubbles that benefit a few at the expense of many.
So far, the government has delayed making any definitive commitments on the demands of the pro-growth lobby. However, as political challenges mount—especially from PTI in Punjab—pressure to prioritize short-term growth over long-term stability will intensify. Any unexpected financial inflows from Gulf allies could further tempt policymakers to abandon their reform agenda in favor of unsustainable consumption-driven growth. Such a move would derail the ongoing economic recovery and undermine Pakistan’s credibility in the eyes of international lenders and investors.
The way forward is clear: the government must stand firm in its commitment to reform. It should prioritize sustainable economic policies over populist measures and resist external pressures that could lead to another cycle of economic mismanagement. Only through disciplined fiscal policies and a strong commitment to structural changes can Pakistan emerge from its economic turmoil with a stable and prosperous future.