They have taken 24 loans from the IMF, to date, all under the promise of economic growth. Here are a few examples of misuse of funds, in the context of not fulfilling the conditions they had presented for availing loans. Source: AI
Here are some major IMF conditions that Pakistan has historically failed or struggled to meet:
- Tax Reforms
Condition: Broaden the tax base and improve tax collection (especially from the wealthy and elite sectors like real estate, agriculture, and military-run businesses).
Reality: Pakistan continues to have one of the lowest tax-to-GDP ratios in the world. Most burdens fall on the middle and lower class via indirect taxes.
- Subsidy Reduction
Condition: Cut subsidies on fuel, electricity, and food to reduce the fiscal deficit.
Reality: Subsidies are often reintroduced near elections or due to political pressure, derailing fiscal targets.
- Privatization of State-Owned Enterprises (SOEs)
Condition: Privatize inefficient SOEs like Pakistan International Airlines (PIA), Pakistan Steel Mills, etc.
Reality: Very little progress; resistance from unions, military interests, and political stakeholders.
- Currency Management
Condition: Allow market-driven exchange rates to prevent artificial inflation control.
Reality: Currency manipulation and lack of reserves often lead to massive devaluation shocks, undermining stability.
- Transparency and Fiscal Discipline
Condition: Maintain transparency in budget spending and reduce the budget deficit.
Reality: Military and intelligence budgets are often opaque; spending overshoots targets without accountability.
- Monetary Tightening
Condition: Raise interest rates and reduce inflation.
Reality: Inflation remains high due to structural inefficiencies and imported inflation.
Result: These failures often lead to suspended or delayed tranches, renegotiations, or new loans without addressing the core issues—creating a vicious cycle of borrowing without reform.
