Pakistan gets 25th IMF bailout despite repeated breach of loan terms

New Delhi, Dec 26 Pakistan has become chronically dependent on bailouts from the International Monetary Fund (IMF) as it has been plunging from one fiscal crisis into another over the years. It is, however, ironic that the country been getting these loans despite Islamabad’s failure to meet the IMF conditions to revive the economy.

Pakistan is now headed for its 25th IMF loan with the latest $7 billion Extended Fund Facility (EFF), stretched over 37 months, and the accompanying $1.4 billion Resilience and Sustainability Fund (RSF). Under the Staff-Level Agreement reached in October, Pakistan will receive $1 billion under the EFF and $200 million under the RSF, bringing total disbursements under the two arrangements to about $3.3 billion.

"While this inflow offers temporary relief to a shaky market, it underscores the chronic dependence on external bailouts. Each programme is designed to stabilise the economy through macroeconomic discipline, yet Pakistan continues to fall short of the structural reforms necessary to create long-term resilience," according to an article in the Asian Lite newspaper.

The IMF’s role is not to micromanage domestic policy but to set fiscal targets, reduce deficits, increase revenue, and rationalise subsidies. Unfortunately, successive Pakistani administrations have opted for politically convenient but socially regressive measures, burdening the salaried class and consumers while shielding powerful interest groups such as agriculture, real estate, and retail from taxation. Only around two per cent of Pakistanis pay income tax, a statistic that starkly illustrates the inequity of the system, the article pointed out.

An IMF report released in November 2025 highlighted persistent corruption challenges in Pakistan and demanded the immediate initiation of a 15-point reform agenda to improve transparency, fairness, and integrity.

The IMF’s Governance and Corruption Diagnostic Assessment (GCDA) noted that Pakistan continues to struggle with budget credibility. Approved projects often fail to receive funding over their life cycle, resulting in delays and cost overruns. Parliamentary oversight is weakened by substantial differences between approved budgets and actual expenditures.

In 2024–25, the National Assembly approved Rs 9.4 trillion in expenditure overruns, five times higher than the previous year. Constituency development funds under the direct control of legislators further skew capital investments and complicate oversight, creating fertile ground for misuse of public authority for private gain.

The IMF prescribes fiscal discipline, but the deeper issue lies not in the conditions it sets but in the political unwillingness of Pakistan’s ruling elite to undertake reforms that would curtail their own privileges. Luxury expenditures by state institutions remain unchecked, subsidies are misdirected, and elite privileges persist even as pensioners face cuts and low-income consumers are burdened with fixed gas charges, the Asian Lite report stated.

The energy sector exemplifies this inequity. Instead of usage-based billing, the government has imposed fixed charges that disproportionately hurt low-income households. While the IMF calls for cost recovery, equitable implementation through progressive tariffs and lifeline slabs remains entirely within Pakistan’s control. Similarly, tax evasion by powerful sectors continues unchecked, leaving the salaried class and consumers of petroleum products to shoulder the lion’s share of the burden, the report added.

The IMF has repeatedly pressed for data-based safeguards, due diligence, and guidelines against corruption, but implementation has been half-hearted. The Paris-based Financial Action Task Force (FATF) has also identified weaknesses and made recommendations, yet progress remains slow.

The problem is not a lack of diagnosis but a lack of political will. Successive governments have failed to broaden the tax base, preferring to rely on compliant taxpayers whose incomes are easily traceable. Agriculture, real estate and retail, both lucrative sectors, remain largely untaxed. Meanwhile, the salaried class pays disproportionately more, and consumers bear the brunt of indirect taxes on fuel and utilities, the report added.

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