THE IMF is often viewed in Pakistan with suspicion, portrayed as a coercive institution enforcing foreign-dictated austerity.
However, this perception oversimplifies the Fund’s global role and the internal shortcomings that push countries like Pakistan toward its doorstep.
The IMF doesn’t impose policies; it offers short- to medium-term concessional loans to countries facing balance of payments crises, coupled with reform programs aimed at restoring macroeconomic stability.
Contrary to the “debt trap” myth, the IMF does not fund large-scale infrastructure projects.
Instead, it provides liquidity—immediate financial resources needed for import payments, debt servicing and currency stabilization during financial distress.
Global precedents show how IMF programs have supported economic transformation.
South Korea, after the 1997 Asian financial crisis, used a $58 billion IMF package and internal reforms to become a high-income economy.
Turkey’s recovery from the 2001 crisis, Poland’s post-Communist transition and India’s 1991 liberalization were all backed by IMF assistance.
In Pakistan, IMF programs often face criticism for being overly harsh on the middle class.
A common myth is that the IMF demands higher taxes on salaried individuals.
In reality, the IMF only sets revenue targets and urges better fiscal discipline.
As Dr. Shahid Kardar explains: “The IMF wants reforms.
It’s the government that chooses the path of least resistance by overburdening those already in the tax net.”
Rather than broadening the tax base or documenting the informal economy, successive governments rely on regressive and politically convenient tools—such as taxing fuel, increasing indirect taxes and expanding withholding taxes.
These taxes, collected in advance on incomes, bank transactions and utilities, are administratively easy but disproportionately affect the already compliant segments of society.
This overdependence reflects domestic policy choices—not IMF compulsion.
The 2023 economic crisis in Pakistan—marked by over 30% inflation, a depreciating rupee and foreign reserves below one month’s import cover—was among the worst in its history.
Long-standing structural issues like chronic fiscal deficits, energy inefficiencies, subsidies and a narrow tax base amplified the crisis.
Under such conditions, turning to the IMF became unavoidable.
Dr.Hafiz A.Pasha rightly noted: “Pakistan’s macroeconomic instability is home-grown.
The IMF is not the problem—it’s the political economy of reform avoidance.
” The criticism that IMF policies exacerbate hardship is not unfounded.
In some cases, its insistence on meeting numerical targets can sideline social impacts.
However, recent years have seen the IMF evolve.
It increasingly recognizes local needs and the importance of social protection.
In Pakistan’s case, the tough conditions of the 2023 Stand-By Arrangement were shaped by the severity of the crisis.
As the country showed initial recovery in 2024, the IMF adopted a more flexible tone—proving that its approach is responsive, not rigid.
As Dr. Ishrat Husain aptly said: “The IMF gives you the medicine, bitter as it is.
But recovery depends on whether the patient follows the prescription or just blames the doctor.
” It is crucial to understand that IMF programs are not externally imposed.
Each program is negotiated and formalized through a Letter of Intent submitted by the borrower’s economic team.
Shifting blame onto the IMF for agreed-upon policies only deflects attention from weak domestic governance.
The IMF is not a foreign enforcer of economic hardship—it is a lender of last resort.
Pakistan’s real challenge lies in its fragile institutions, political resistance to reform and chronic mismanagement.
Rejecting the IMF won’t solve these problems.
Instead, Pakistan must use IMF support to implement deep structural reforms, improve transparency and strengthen its economy from within.
What’s needed now is a shift in mindset—from blame to accountability—if Pakistan is to move toward lasting economic resilience.
—The author is a Lecturer in International Relations at the University of Haripur. (zulfiqardir@gmail.com)
