By S.M. Inam
The release of another one-billion-dollar tranche under Pakistan’s $7bn extended fund facility with the International Monetary Fund might have been expected to offer some breathing space to a battered economy. Instead, it has arrived with a familiar sting: a new round of conditions that all but guarantee further pain for households already stretched to their limits. Under 11 additional requirements attached to the next disbursement, Islamabad has been pressed to raise electricity and gas prices, cut subsidies and increase fuel levies. The result, economists warn, is likely to be another surge in inflation that will steadily hollow out living standards.
Officials say the measures under consideration include “timely” increases in power and gas tariffs to rein in the ballooning circular debt, a reduction of Rs143bn in electricity subsidies and a proposal to raise the petroleum levy on petrol and diesel by Rs5, pushing it to Rs85 per liter. These steps would come on top of repeated price hikes imposed over the past two years. With the latest additions, the number of conditions tied to the IMF program has risen to 64, an extraordinary figure that speaks volumes about the extent to which Pakistan’s economic policymaking is now conducted under external supervision.
The government insists that these demands are unavoidable, the price of stability in an economy long plagued by fiscal indiscipline, weak exports and chronic balance-of-payments crises. There is truth in that argument. Pakistan’s structural problems did not begin with this program, nor can they be resolved overnight. Yet what has made this episode particularly jarring is the lack of candor surrounding it. Only days before the IMF confirmed the tranche, the finance minister declared that the release was “unconditional”, a claim swiftly contradicted by the Fund. The IMF’s response, that no new conditions had been imposed and that it was merely overseeing the implementation of already approved laws, may be technically defensible, but it rings hollow for citizens who experience each tranche as the prelude to fresh austerity.
In practice, every IMF review involves negotiation, and every negotiation produces new pressures. Successive governments have entered these talks professing awareness of public hardship, only to accept the terms wholesale and present the consequences as inevitable. What should have happened, critics argue, is a transparent agreement at the outset on the full framework governing the loan, giving the public some clarity and predictability. Instead, Pakistan has endured a drip-feed of conditions, with each instalment triggering renewed anxiety over electricity bills, gas prices and fuel costs. For ordinary households, the cumulative effect has been suffocating.
Electricity and gas tariffs have already been raised repeatedly at the IMF’s behest, pushing basic utilities beyond the reach of many families. Fuel price increases ripple through the economy, driving up the cost of transport, food and essential goods. Wages, meanwhile, have failed to keep pace. In this context, further hikes are not abstract policy adjustments but daily blows that force households to cut back on nutrition, healthcare and education. This reality raises an uncomfortable question that the government has yet to answer convincingly. If, as ministers repeatedly claim, foreign investment is flowing, industrial activity is picking up and the economy has stabilized with the backing of partners such as Saudi Arabia, the United Arab Emirates, Qatar and China, why does Pakistan remain trapped in a cycle of repeated submission to the IMF?
Despite assurances that this program would restore confidence and mark a turning point, there is little to suggest that it will be Pakistan’s last encounter with the Fund. Part of the problem lies in credibility. Official rhetoric about recovery and resilience sits uneasily alongside policies that deepen dependence and shift the burden of adjustment onto the poorest. The IMF’s insistence on higher energy prices reflects a legitimate concern about unsustainable subsidies and fiscal leakage. Yet the manner in which these adjustments are implemented matters. When reforms are reduced to blunt price hikes and regressive taxation, without parallel efforts to broaden the tax base, curb elite privileges and stimulate productive growth, they risk entrenching inequality rather than correcting imbalances.
There is also a political cost. Repeated IMF programs erode public trust in the state’s ability to manage its own affairs. Each tranche reinforces the perception that economic sovereignty has been mortgaged, and that decisions affecting millions are being taken to satisfy creditors rather than citizens. This perception may not be entirely fair, but it is powerful, and it fuels resentment that can destabilize fragile democratic institutions.
(The writer is a former government officer and a senior analyst on national and international affairs, can be reached at inam@metro-morning.com)
