Hollow applause

THE IMF’s latest acknowledgement that Pakistan’s policy efforts under the ongoing Fund programme have “helped stabilise the economy and rebuild confidence” should be taken with a pinch of salt. The statement, which cited a primary fiscal surplus, containment of inflation and the first current account surplus in 14 years, recognises Pakistan’s efforts to stay the course and meet most programme targets. The gains made over the last couple of years are not trivial. After years of twin deficits, currency volatility and dwindling reserves, even a modest primary surplus signals a degree of fiscal discipline. The current account turnaround, though largely driven by import compression, rising remittances and bilateral debt rollovers, has eased external pressures. For a country repeatedly threatened by sovereign default, stabilisation is an achievement. Yet there is no reason to celebrate. Revenue shortfalls persist, and while the recent super tax ruling by the Federal Constitutional Court may offer temporary relief, durable fiscal reform requires broadening the tax base rather than relying on episodic windfalls. More concerning is the slippage on structural benchmarks and indicative targets — the very reforms that determine whether or not stabilisation translates into sustainable growth. The Fund’s Governance and Corruption Diagnostic is another reminder that macroeconomic stability rests on institutional credibility. Without structural reform, fiscal gains are temporary.

Ironically, the IMF’s praise comes at a time when fresh data has exposed the social costs of stabilisation. New poverty estimates suggest that nearly 70m Pakistanis are now living below the monthly poverty line of Rs8,484 — which does not cover even the most basic needs. Releasing the findings of an official survey, Planning Minister Ahsan Iqbal acknowledged that the poverty rate has climbed to an 11-year high of almost 29pc, up from just under 22pc in 2019. Even more troubling is the sharp deterioration in income distribution, with the inequality index rising to 32.7 — the highest level in nearly three decades — as real incomes and household consumption contracted due to inflation and economic slowdown. The labour market picture is equally sobering. The latest Labour Force Survey shows unemployment surging to 7.1pc, reflecting not only cyclical weakness but also structural rigidities in job creation.

Together, these indicators underscore the widening disconnect between macroeconomic stabilisation and the lived economic reality. While fiscal consolidation and external rebalancing may reassure creditors and credit rating agencies, they have not given relief to households. The data suggests that the adjustment burden has fallen disproportionately on lower- and middle-income groups, raising questions about the sustainability of reform without a parallel strategy for growth, employment and social protection. And yet, the government misses no opportunity to flaunt stabilisation as an alternative to deep-seated reforms that it continues to sidestep.

Published in Dawn, February 23rd, 2026

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