Key takeaways
- Pakistan needed US$12 billion in rollovers from China, Saudi Arabia and the UAE.
- The US$7 billion IMF Extended Fund Facility was delayed while rollovers were secured.
- The FY2024-25 borrowing plan reached Rs32 trillion.
- IMF conditions stabilise the economy but can deepen hardship if not paired with reform.
- Tax, energy, agriculture and export reforms are the route out of repeated bailouts.
In this Dawn column (September 2024), Dr. Ghulam Mohey-ud-din looks at Pakistan’s dependence on repeated external rescue and argues that stabilisation and structural reform have to be pursued together, not in sequence.
The argument
At the time of writing, Pakistan was waiting on a US$7 billion IMF Extended Fund Facility whose approval depended on securing about US$12 billion of loan rollovers from China, Saudi Arabia and the UAE. The government’s borrowing plan for FY2024-25 had reached Rs32 trillion. Rollovers provide breathing space, the column notes, but they leave the weaknesses that caused the shortfall untouched.
IMF conditions, including phasing out special economic zone incentives, cutting subsidies and strengthening anti-corruption measures, can restore short-term stability. Without a wider reform agenda, however, they risk raising poverty while the economy returns to the same crisis a few years later.
The column separates what must happen now from what must happen next. In the short term: secure rollovers, negotiate workable programme terms and stabilise the exchange rate. In the long term: change the structure that creates the need for rescue in the first place.
What needs to change
- Broaden the tax base and reduce reliance on indirect taxes.
- Reform the energy and agriculture sectors.
- Diversify exports beyond textiles and improve the climate for foreign investment.
- Strengthen transparent institutions, governance and anti-corruption enforcement.
The central message is that each bailout should be used to buy time for reform, not to replace it.