ISLAMABAD:
The government has begun discussions to develop a credible strategy to permanently exit the International Monetary Fund (IMF) after the expiry of the $7 billion bailout package, underscoring the urgent need for coordinated national efforts to build buffers and avoid any future programme.
Government sources told The Express Tribune that a high-level meeting has recently taken place to determine whether Pakistan can sustain its economy in the absence of the IMF umbrella after September 2027, when the bailout package would come to an end.
In the absence of urgent reform measures that require building sufficient foreign exchange reserves and creatingcomplete value chains for industries to enhance exports, Pakistan risks slipping into another programme, according to an assessment by the Planning Commission. When contacted, Minister for Planning Ahsan Iqbal said, “Our recommendation was that if we are to make the current IMF programme the last one, then we need to commit ourselves to $63 billion in exports by 2029; otherwise, we will face an external sector gap.”
The sources said the official assessment was that when the country transitions from stabilisation to growth mode, its current account deficit may temporarily increase to below 2% of GDP, or over $10 billion per annum. This would require additional financing of $4 billion in 2027-28, $5.5 billion in 2028-29, and another $3 billion in 2029-30.
The sources said the Planning Commission’s assessment was that the country can sustain itself without the IMF and can also manage a projected external financing requirement of over $12 billion from 2028-30, subject to urgent implementation of deep-rooted reforms.
According to the assessment, Pakistan’s additional gross financing needs could exceed $12 billion during the 2028-31 period. This is projected to be met by increasing exports by another $4 billion, attracting $4 billion more in remittances, and securing $3 billion in new foreign direct investment. The rest of the gap is projected to be filled through agriculture import substitutes.
The sources said the assessment was that Pakistan can still avoid the need for a 27th IMF programme with strong fiscal and external buffers. It currently remains vulnerable due to weak buffers and high financing pressures. Whole-of-government reform ownership is essential. The Planning Commission is also of the opinion that the government should explore options to convert the current $14 billion short-term bilateral loans into long-term financing to lower external financing requirements.
The Ministry of Finance spokesperson did not reply to a question on whether it agreed with the Commission’s assessment of the external financing requirements and the feasibility of converting short-term loans into long-term financing.
Discussions about the country’s long-term economic stability have begun after recent public statements by the State Bank of Pakistan (SBP) and the Special Investment Facilitation Council (SIFC) regarding the ineffectiveness of existing economic growth models. There have also been questions as to why the government’s plans are not creating any meaningful impact on Pakistan’s macroeconomic horizon and why the country remains dependent on the IMF and other international creditors.
The Planning Commission has proposed a three-tier implementation plan, with the first phase starting next year until 2027. It would require reforms in fiscal management, energy, governance, human resource development and export alignment, and laying foundations for the next phase.
The second phase, 2029-32, would require accelerated strategic focus on investment attraction as a growth catalyst, to kick-start key economic processes with full thrust and focus on industrialisation, export expansion, technological adoption and agricultural modernisation.
In the third phase, it has proposed a strategic focus on drivers of high-quality growth towards a techno-economy.
The sources said the Planning Commission’s perspective was that its Uraan Pakistan, a 10-year economic plan, could help keep inflation low, maintain economic growth above 6% and enhance exports to a point where external buffers can be built.
There has been criticism over the lack of practical aspects of these plans, including Uraan Pakistan, which talks about making Pakistan a $1 trillion economy by 2035, but contains no effective strategy to achieve it.
Sources said Prime Minister Shehbaz Sharif has instructed the Planning Commission to develop a result-based strategy to translate the plan into outcomes so that reliance on the IMF can be permanently avoided.
The Commission’s assessment was that public and private investment is declining and there is a lack of investment in productive sectors. There is also a lack of an integrated and structured approach, and poor alignment of investment with strategic plans.
Economic growth is on a downward trajectory, averaging 3.9% compared to 6% in regional countries since 2000, representing declining total factor productivity.
The unemployment rate has risen since 2018-19, with unemployed persons increasing to 4.7 million in 2020-21 and reaching about 6 million by 2024-25. Pakistan ranks 168 out of 193 on the Human Development Index – well below South Asia and global peers.
Regional disparity has become more pronounced despite devolution under the 18th Constitutional Amendment and transfer of larger resources through the 7th NFC Award.
The Planning Commission’s assessment was that sustainable economic growth requires investment of more than 20% of GDP, compared to the current level of around 14%.
Pakistan’s exports increased only 4.1 times this century, whereas Vietnam’s increased 26 times in the last 24 years. Pakistan also has some of the highest tax rates across income brackets, with a top rate of 45% for high earners compared to 30% in India and Bangladesh, which need to be rationalised to encourage business activity.
According to the internal assessment, achieving macroeconomic targets requires shifting investment towards industry and services, which are the primary engines of productivity and exports. Exports need to rise well above current trends to support external sustainability.
It has also proposed governance reforms to fix systemic weaknesses that lead to fiscal leakages and contribute to low investment, low economic growth and low exports.
