Dr. Ikramul Haq & Abdul Rauf Shakoori
Pakistan’s economy is at a decisive moment where years of fiscal burden, external pressure, and structural flaws appear to be giving way to cautious recovery and a renewed sense of direction. The narrative surrounding Pakistan’s financial position has long been defined by crisis, but the recent statement of International Monetary Fund (IMF) and the ongoing engagement of Federal Finance Minister, Muhammad Aurangzeb, at the annual meetings of the IMF and World Bank in Washington suggest a subtle yet meaningful shift.
The tone of IMF’s end-of-mission assessment reflects not only progress in implementing agreed reforms but also a growing confidence in Pakistan’s capacity to sustain macroeconomic stability and align policy execution with the commitments made under the 37-month US$7 billion Extended Fund Facility (EFF) programme and US$2.1 billion Resilience and Sustainability Facility (RSF).
The arrival of Muhammad Aurangzeb in Washington indicates a decisive diplomatic and economic undertaking. The meetings he will attend, more than sixty-five in total, are designed to reaffirm Pakistan’s place within the global financial architecture.
The engagement with IMF Managing Director Kristalina Georgieva, the World Bank President Ajay Banga, and senior officials of the International Finance Corporation and Multilateral Investment Guarantee Agency reflects a comprehensive strategy to reposition Pakistan’s economic outlook.
The schedule also includes discussions with global credit rating agencies, US government officials, and international think tanks such as the Atlantic Council and the Peterson Institute for International Economics, highlighting the breadth of Pakistan’s current engagement and the seriousness of its intent to regain credibility among international partners.
The IMF mission that concluded its visit to Pakistan earlier this month reported “significant progress” toward a staff-level agreement, noting that programme implementation remains strong and broadly aligned with the government’s reform commitments.
The statement underlines the continuation of fiscal consolidation by providing necessary flood recovery support, maintaining a tight and data-driven monetary policy to anchor inflation expectations, and restoring viability in the energy sector through regular tariff adjustments and cost-cutting reforms.
The Fund also recognized the government’s commitment to advancing structural reforms aimed at reducing the state’s footprint in the economy, strengthening governance and transparency, and creating a more competitive business environment.
The economic indicators over the past fiscal year provide mixed but relatively improved signals. The inflation rate, though still above comfort levels, is trending downward, and the government has achieved a primary fiscal surplus of about two percent of GDP in the first half of the fiscal year. These gains are modest, but they represent an important reversal of the contractionary patterns that dominated the previous two years. The reduction in current account deficit and relative exchange rate stability has created a platform upon which further reforms may now be built with more credibility and less volatility.
The statement by the IMF, though cautiously worded, acknowledges that the authorities have demonstrated a stronger commitment to implementing the fiscal, monetary, and energy reforms that are central to restoring sustainability. The Fund’s recognition of Pakistan’s progress carries weight precisely because it follows years of uneven compliance, missed targets, and delayed structural reforms.
The new administration’s engagement with the IMF and other multilateral partners suggests an intent to avoid the cyclical pattern of reform and reversal that has historically undermined credibility. Despite debt obligations and tight fiscal space, policy has become more predictable, which is critical for investor confidence and long-term planning.
The challenge before Pakistan remains substantial. The country’s debt accumulation, particularly its external obligations, continues to exert immense pressure on the balance of payments. The energy sector, though subject to a series of reform efforts, remains a source of fiscal drain through persistent circular debt and challenges in generation and distribution.
The agricultural sector, a backbone of the economy, suffers from low productivity, outdated irrigation systems, and increasing vulnerability to climate-related surprises. The devastating floods of recent years have not only disrupted livelihoods but also revealed the fragility of infrastructure and the inadequacy of disaster management mechanisms.
The IMF’s emphasis on climate resilience through the about US$2.1 billion Resilience and Sustainability Facility (RSF) is therefore an essential addition, reflecting the recognition that economic reform in Pakistan cannot be isolated from environmental challenges.
The state of governance and institutional strength continue to determine how effectively reforms translate into results. The IMF has repeatedly emphasized the importance of enhanced transparency, accountability, and predictability in public decision-making.
The autonomy of State Bank of Pakistan, the efficiency of the Federal Board of Revenue (FBR), and the professional management of state-owned enterprises all remain critical to sustaining macroeconomic gains.
The digital transformation initiatives underway at the FBR, including Pakistan’s participation in the World Bank’s regional roundtable on tax system modernization, are positive signs of institutional reforms. However, lasting improvement requires depoliticized implementation, consistent leadership, and a merit-based approach to public sector management.
The political dimension of reform cannot be separated from the economic one. The durability of fiscal discipline and regulatory changes depends on public acceptance and political continuity. The burden of adjustment must be distributed in a manner perceived as fair, with social protection mechanisms shielding those most affected by inflation and subsidy rationalization.
The government’s ability to communicate its economic vision clearly to both domestic and international audiences will play a defining role in shaping market sentiment and public trust. The IMF program provides a framework, but ownership of the reform process must rest with Pakistan’s own institutions and leadership.
The future of the economy will hinge on a combination of sustained fiscal discipline, targeted investment in energy and infrastructure, and a deepened commitment to governance reform. Pakistan urgently needs comprehensive tax reform, as its tax-to-GDP ratio is still lower than similar economies.
Expanding the tax base, improving compliance, and reducing distortionary exemptions can generate resources for development without overburdening the formal sector. Simultaneously, investment in renewable energy and reduction of import dependence can help address structural imbalances and strengthen resilience against external shocks.
The way forward requires policy patience and consistent execution. The temptation to pursue short-term measures for political gain must yield to the imperative of building a resilient economic foundation. Pakistan’s engagement with the IMF and global institutions creates an opportunity for lasting reform.
The credibility gained through this process can open access to low-interest financing, encourage private investment, and support diversification of export markets. The government’s challenge will be to ensure that this credibility is not dissipated through policy slippage or inconsistent messaging.
The overall assessment emerging from the IMF’s statement is that Pakistan’s reform programme is on track, but the margin for error remains narrow. The improvement in fiscal management, moderation in inflation, and progress on structural reforms have created a base for cautious optimism. However, the sustainability of this progress will depend on institutional integrity, policy coherence, and continued engagement with global partners.
The government must now consolidate gains, accelerate governance reforms, and integrate climate resilience into all aspects of planning and execution. Future economic stability will rely more on internal discipline, credible policies, and turning technical progress into lasting prosperity than on external bailouts.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, environment, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing.
He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law.
He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 3000 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
X (formerly Twitter): DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
X (formerly Twitter): Adbul Rauf Shakoori
The recent publication, coauthored by these writes with Huzaima Bukhari is
Pakistan Tackling FATF: Challenges & Solutions, available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46