IMF – Pakistan’s Repeated Reliance on IMF Loans Raises Long-Term Economic Concerns
IMF – Pakistan’s long-standing reliance on financial assistance from the International Monetary Fund has once again come under scrutiny, with a new analysis warning that repeated borrowing has entrenched economic vulnerabilities rather than resolved them.
The assessment, written by former State Bank of Pakistan Deputy Governor Riaz Riazuddin and published in a national daily, argues that successive governments have fallen into a cycle of dependence that mirrors the behavior of compulsive borrowing. Instead of addressing the structural causes of recurring foreign exchange shortages, policymakers have relied on IMF programmes as short-term fixes, leaving the underlying problems intact.
A Pattern of Borrowing Without Structural Change
According to the analysis, Pakistan’s economic management has been marked by persistent fiscal excesses and weak revenue generation. Public spending has remained difficult to control, while efforts to expand the tax base and stabilize public debt have repeatedly fallen short. As a result, external borrowing has become a routine response to balance-of-payments pressures rather than a temporary measure tied to meaningful reform.
The author notes that borrowers who expect continued external support often assume that future relief will offset present risks. This expectation, he argues, encourages spending beyond sustainable limits and reduces the urgency to confront difficult policy choices. Over time, the country’s income becomes increasingly committed to servicing existing debt, forcing further borrowing simply to maintain basic economic stability.
Short-Term Relief, Long-Term Costs
While IMF assistance can provide immediate stabilization, the report cautions that such support can also weaken policy discipline if not paired with firm domestic commitment. Initial inflows may ease foreign exchange pressures or support consumption, but without reform, debt gradually stops financing growth and instead sustains day-to-day survival.
The analysis highlights that Pakistan is currently undergoing its 25th IMF programme, a figure that underscores how temporary relief has repeatedly substituted for long-term solutions. Despite this extensive engagement, core challenges such as export competitiveness, revenue mobilization, and efficient public spending remain unresolved.
Denial and Deferred Reality
Another recurring theme in the report is denial. Just as individuals struggling with addiction may underestimate risks or delay change, governments, the author suggests, often assume that economic growth will eventually correct imbalances. Warnings are acknowledged but postponed, and optimistic narratives replace concrete action. This mindset, the analysis argues, deepens moral hazard and increases the risk of over-indebtedness.
Such behavior is particularly striking given Pakistan’s extensive experience with IMF oversight. Rather than using repeated programmes to reset economic priorities, policymakers have continued practices that contribute to high debt, including maintaining an overvalued currency that encourages imports and strains foreign reserves.
Currency Management and External Inflows
The article points out that recent improvements in foreign exchange reserves have been driven largely by higher remittances rather than structural reforms. Export performance has remained largely stagnant, while the rupee continues to be strong in real terms. This combination, the author warns, limits competitiveness and reinforces dependence on external inflows.
When reserve accumulation aligns with IMF guidelines, the Fund has generally refrained from strong objections to currency valuation, instead advising authorities to allow the exchange rate to be determined by market forces. However, without consistent implementation of this approach, imbalances tend to re-emerge.
Who Ultimately Benefits
The analysis concludes with a stark warning: unless authorities demonstrate genuine commitment to reform, the primary beneficiaries of IMF programmes will be policymakers rather than the broader population. The public, meanwhile, bears the cost of delayed reforms through inflation, reduced purchasing power, and slower growth.
Without decisive action to break the cycle, the report suggests, Pakistan risks remaining trapped in a pattern where external assistance offers temporary relief but fails to deliver lasting economic stability.