IMF Applauds Fiscal Discipline Amidst Rising Poverty in Pakistan
In Washington, the International Monetary Fund has praised Pakistan's fiscal discipline, highlighting a primary surplus and the country's first current account surplus in 14 years. Meanwhile, in Islamabad, policymakers speak of stabilisation, confidence, and reform momentum. The narrative appears tidy: Pakistan has stepped back from the brink and is now on firmer ground. However, outside official briefings and donor statements, the reality is harsher and more complex.
The Stark Reality Behind the Stability
Poverty has climbed to 29 per cent, marking an 11-year high, while income inequality has reached levels not seen in nearly three decades. Real household incomes have shrunk, and unemployment is at a 21-year peak. For millions of families, this so-called "stability" feels indistinguishable from suffocation. This is not a contradiction but the central paradox of Pakistan's current economic moment. The country has stabilised, but it has not healed.
There is no denying that macroeconomic repair was necessary. Pakistan was careening towards default not long ago, with foreign reserves evaporating, the rupee in free fall, and inflation scorching households. The IMF programme imposed discipline where domestic politics had repeatedly failed. Subsidies were cut, energy prices were raised, the currency was allowed to adjust, and monetary policy tightened, slowing the bleeding. However, stabilisation is not the same as recovery; it is emergency care, not rehabilitation.
Uneven Burden of Stabilisation Policies
When subsidies vanish and indirect taxes rise, the burden does not fall evenly. It lands hardest on those already stretched thin—lower-middle-income earners, daily wage workers, and small traders. Inflation may be "contained" now, but the damage of the surge remains embedded in daily life. Essentials like food, electricity, and fuel have become luxuries, and wages have not kept pace.
The result is visible in the poverty numbers: seventy million people are now officially below the poverty line. In rural areas, more than a third of the population struggles to meet basic needs, and in Balochistan, nearly half. This is not cyclical discomfort but structural erosion. Planning Minister Ahsan Iqbal has conceded that stabilisation policies contributed to the spike in poverty, acknowledging that fiscal consolidation and currency devaluation are blunt instruments that restore balance sheets but squeeze households.
Decades of Avoidance and Structural Weaknesses
Blaming the IMF alone misses the larger truth. Pakistan's vulnerability did not begin with this programme; it is the product of decades of avoidance. Successive governments, civilian and otherwise, chose expediency over reform. Instead of broadening the tax base, they leaned on the already compliant. Instead of restructuring loss-making state enterprises, they subsidised inefficiency. Instead of investing consistently in export competitiveness, they relied on remittances and short-lived consumption booms.
Each cycle followed a predictable arc: stimulate growth through borrowing, enjoy a temporary surge, watch the current account balloon, then return to the IMF when financing dries up. The current account surplus being celebrated today is partly due to suppressed imports as domestic demand has weakened, reflecting caution and constraint more than competitiveness. Meanwhile, structural weaknesses remain stubborn. Pakistan exports less than many smaller economies, manufacturing has not regained sustained momentum, and growth is often "jobless," with output expanding without meaningful employment gains.
Political Instability and External Challenges
Political instability has exacerbated these issues. Since 2018, Pakistan has lurched through power struggles, dissolutions, and polarising rhetoric, making policy continuity fragile. Investors hesitate to commit long-term capital when rules may change with the next confrontation. Security challenges in provinces like Khyber Pakhtunkhwa and Balochistan add another layer of fragility, disrupting livelihoods and deterring private enterprise. Climate shocks, such as the devastating floods of 2022, have compounded fiscal strain and deepened rural vulnerability.
The Path Forward: From Stabilisation to Transformation
All of this forms a web of constraint that no quarterly IMF review can untangle. The IMF can insist on fiscal targets, demand transparency reforms, and monitor performance benchmarks, but it cannot generate political consensus within Pakistan for big structural change. That responsibility rests squarely with the country's leadership. The uncomfortable question remains: is stabilisation being used as a bridge to transformation or as an end in itself?
There is a risk that policymakers mistake improved macro indicators for genuine progress. A primary surplus and a steadier exchange rate are achievements, but they are not destiny. If households continue to experience declining real incomes, if inequality widens, and if employment remains scarce, social frustration will simmer beneath the veneer of fiscal order. Economic reform cannot succeed indefinitely without social legitimacy.
The window for meaningful change is narrow but real. Stabilisation has created breathing room, with default risk receding and inflation cooling. This is precisely when governments must pivot from austerity to productivity—from emergency management to opportunity creation. This means serious tax reform that broadens the base, reforming state-owned enterprises that drain public resources, investing in education and skills with measurable outcomes, and creating conditions for export-oriented industries to thrive rather than survive.
Above all, it requires political maturity—a recognition across parties that economic policy cannot reset with every change in power. Pakistan does not lack talent or potential; it lacks sustained execution. A nation cannot austerify its way to prosperity, nor can it borrow its way out of structural weakness. Stabilisation without growth is stagnation by another name.
Conclusion: The Gap Between Narratives
For international lenders, Pakistan's story may read like a cautious success. For millions of citizens, it feels like prolonged strain with no visible payoff. The gap between these narratives is dangerous. The spreadsheets look better, but the streets do not. Until economic recovery translates into rising incomes, meaningful jobs, and reduced inequality, declarations of turnaround will sound premature. Stabilisation has prevented collapse, and that matters, but preventing collapse is not the same as building prosperity. Pakistan has stepped back from the edge; the harder question now is whether it dares to move forward.
