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India Today
27-05-2025
- Business
- India Today
Pakistan's bailout addiction: Why the IMF keeps saving a sinking economy
'A country that runs on borrowed money and borrowed time eventually runs out of both.'That line could well serve as the preface to Pakistan's economic story. Since joining the International Monetary Fund (IMF) in 1950, the country has entered into no fewer than 25 loan May 2025, Islamabad secured its latest lifeline: a $1 billion disbursement under the IMF's Extended Fund Facility (EFF), part of a broader $7 billion package. Yet, it remains stuck in a self-defeating cycle, perennially at the edge of default, its economy weighed down by debt, dysfunction, and dangerous OF CRISIS, PARALYSIS OF REFORM Pakistan's economic malaise is not an accident. What began as a post-independence promise quickly curdled into chronic mismanagement. A toxic mix of military overreach, poor planning, and an import-heavy growth model has left its fiscal core hollow and its institutions end-2024, Pakistan's external debt had ballooned to over $133 billion, which is more than a third of its GDP. Interest payments alone devour 43% of federal revenues. Its foreign exchange reserves are also dwindling. And with over $26 billion in repayments looming in 2025–26, Pakistan's economic troubles are far from structural problems are equally grim. The tax-to-GDP ratio hovers at a dismal 9.2%, one of the lowest globally, with agriculture and retail—major components of the economy—largely outside the tax net. Growth remains anaemic: agriculture expanded just 0.9% in the first half of FY25; industry shrank 0.4%.advertisementThe country's GDP growth for FY25 stood at 2.68%, similar to what the IMF projected, but less than its government's target of 3.6%. Moreover, the World Bank has flagged rising poverty and food insecurity, warning that 10 million Pakistanis face acute hunger this World Bank also labelled Pakistan's growth model, marked by high public consumption, low productivity, and heavy borrowing, as military's entrenched role in the economy further complicates reform. Its business empire, accounting for 5-10% of GDP, remains mostly untaxed, while new investment decisions now flow through the military-led Special Investment Facilitation Council (SIFC).PAKISTAN'S BAILOUT ECONOMYIndia has taken sharp note of Pakistan's pattern. Since 1989, Pakistan has received IMF disbursements in 28 of 35 years. Four programs in just the last five. 'If previous packages worked,' New Delhi asked, 'why is Pakistan always back at the table?'The frequency, India argues, raises uncomfortable questions—either about the IMF's monitoring, or Islamabad's credibility as a reformer. Or also flagged the role of Pakistan's military, citing a 2021 UN report that called the army-linked corporate empire the country's largest conglomerate. That influence has only grown under the SIFC, which now shapes investment strategy and policy India's sharpest criticism is moral. It warned that repeated bailouts—absent accountability—risk enabling cross-border its submission, India cited the IMF's own Evaluation Report on Prolonged Use of IMF Resources, which acknowledged perceptions that political factors often guide Pakistan's access to funds.'Rewarding continued sponsorship of cross-border terrorism sends a dangerous message to the global community, exposes funding agencies and donors to reputational risks, and makes a mockery of global values,' India IMF, constrained by protocol, stopped short of addressing those moral concerns directly. But it did take note of India's abstention from the MORE EASY BAILOUTSThis time, however, the IMF isn't writing blank cheques. The Staff-Level Agreement, released on May 17, outlines the Fund's most stringent conditions yet. Beyond macroeconomic reforms, it calls for politically explosive measures: taxing agricultural income, expanding the GST net, slashing power subsidies, restructuring state-owned enterprises, and enforcing anti-money laundering (AML) also demands action on water governance and climate resilience, marking a shift towards holistic reform. These demands directly target Pakistan's most entrenched interest groups: feudal landlords, trader lobbies, and the military-industrial perhaps the first time, the IMF isn't just asking Islamabad to manage numbers, but to confront its own power now faces its hardest truth: the world is still bailing, but it keeps sinking. Unless Islamabad ends its twin addictions to borrowed money and ideological extremism, it will not just default on loans. It will default on the very promise of stability and prosperity for its Pakistan embraces reform or retreats into old habits will determine if its future lies in genuine recovery, or if the hopes of its economy will forever rest on Watch
Express Tribune
25-05-2025
- Business
- Express Tribune
Operation Bunyanum Marsoos to operation economy
Listen to article The Operation Bunyan Marsoos (OBM) concluded with a decisive victory for Pakistan. The armed forces' zeal and unwavering commitment to protecting the motherland thwarted all attempts by adversaries (India and Israel). Pakistan has once again demonstrated its ability to be a formidable power, possessing both the will and the capacity to safeguard its sovereignty and interests. This reinforces the fact that in challenging times, Pakistan achieves remarkable feats, and Pakistanis are a steadfast and resilient nation. The Pakistani nation has demonstrated this repeatedly, from the 1965 war to the 2022 flood. Thus, no one should doubt the ability or resolve of the people and the State of Pakistan to defend its sovereignty and interests. However, the zeal and commitment were not without wisdom. It is apparent from the decision-making, observance of merit, appointment of the right person for the right job, and establishment of the chain of command. for example, the army, air force, and navy are always led by professional and brilliant soldiers from their respective fields. it never happened that a navy sailor led the air force. the observance of merit and commitment to the right person for the right job has turned the armed forces into a formidable power and contributed to remarkable achievements. Pakistan needs to carry the same mentality, policy, strategy, and commitment to turn around the economy. Firstly, apply the policy of the right person for the right job. In pursuance of this policy, Pakistan needs to entrust economic planning and management to economic professionals with brains. They are trained to formulate and oversee economic strategies. A bird's-eye view of global economic institutions, as well as national ministries and departments, clearly indicates that economists lead the charge in driving economic progress. Unfortunately, in the case of Pakistan, the situation is quite different. Economists are often sidelined, while those outside of the field frequently manage economic affairs. The Special Investment Facilitation Council (SIFC) serves as a prime example in this regard. SIFC is an excellent and timely initiative; it was much needed. However, its execution falls short. Policymakers have overlooked the importance of selecting the right people for the right jobs. SIFC has been staffed with bureaucrats and military personnel who possess little or no understanding of the economy or its dynamics. Consequently, after more than two years, aside from a few projects, SIFC has struggled to deliver on its perceived objectives. The finance ministry offers another prominent example. It is often led by chartered accountants and bankers who are not trained to plan or manage the economy. Second, indigenous wisdom and local experts, who are working within the system, should lead the development of economic policies and plans. They may not be good at speaking English or giving fancy presentations, but they know the economy better than anyone else. They have devoted their lives to understanding and operating the economic system during its most challenging times. They are aware of the strengths and weaknesses of Pakistan's economic system. Unfortunately, the Pakistani elite do not like them and discourage them. The elite enjoy listening to fancy presentations and fluent English and are impressed by international organisations' tags, such as the World Bank and the International Monetary Fund (IMF). Thus, they love to import expats and consultants. The expats and imported consultants do not fully understand the ground realities, weaknesses, and strengths of Pakistan's economic system. They only give fancy slogans or do marketing for foreign companies. They are selling false dreams of entering the tertiary economy by bypassing the secondary economy, which is not possible. Unfortunately, our elite is happy with such slogans. Third, before devising any policy or plan, policymakers and planners must have a strong understanding of the ground realities. It must be a prerequisite for policy development. For example, these days, every expat and imported consultant is talking about technology and urging Pakistan to venture into it and make it a leading area of work. There is no second opinion that Pakistan must venture into the technology field; however, it should have a place on the priority list, given its role in the economy and Pakistan's economic status. There is no harm in dreaming big, but we must also remember that the execution of policies and plans is done based on ground realities, not fancy slogans. The ground realities indicate that Pakistan is not a major producer of technology, especially as it lags in the production of hardware such as machines, laptops, satellites, or mobile phones. Pakistan is only a consumer of the technology, and expats and consultants advise them to buy technology from global companies. Furthermore, the analysis of ground realities suggests that, at present, the strength of our economy is based on agriculture, minerals, livestock, tourism, and defence products, among others. Thus, we need to focus on modernising agriculture, developing an agricultural and livestock value chain, and building markets for defence products. Simultaneously, Pakistan needs to work towards transitioning to a secondary economy by fast-tracking industrialisation. The transition will also give an impetus to technology development. Unfortunately, we are not doing it. We are blindly running after the fancy slogans raised by expats or imported consultants. Thus, if Pakistan wants to grow, Pakistan needs to change. If Pakistan successfully changes, then Pakistan can turn around its economy. Fortunately, we have an excellent opportunity to do so through the China-Pakistan Economic Corridor (CPEC). The CPEC has all the ingredients that can help Pakistan revive its economy and pave the way for sustainable development. Following the successful completion of the first phase, CPEC has now entered its second phase. The long-term document of CPEC shows that industrialisation and agricultural cooperation would be driving forces during the second phase. Moreover, Pakistan and China have strengthened their science and technology cooperation to create and enhance Pakistan's technological base. These three areas of collaboration can fast-track the transition to the secondary economy and pave the way for the tertiary economy. However, to fully benefit from the CPEC and leverage our strengths, Pakistan must address the areas discussed above. Let's try to understand the importance of these areas or required interventions through an example. For instance, consider a scenario: can Pakistan appoint a skilled doctor to the post of air chief marshal instead of a professional soldier from the Pakistan Air Force? If Pakistan had appointed an engineer as air chief marshal, what would have been the status of Pakistan in the recent war? During the recent conflict, the air force was led by a career soldier who dedicated his life to the Pakistan Air Force. Now, imagine another scenario: was it appropriate to hire a foreign consultant, such as someone from the American Air Force, to lead the Pakistani Air Force by arguing that he leads the most advanced and largest air force in the world? No, not at all, because he does not understand the Pakistani Air Force and lacks the passion to serve the country. The same is true for the economy. In conclusion, based on the above discussion and examples, three suggestions can be listed: hiring the right person for the right job, stopping the import of expats and consultants, and making decisions based on ground realities. THE WRITER IS A POLITICAL ECONOMIST AND A VISITING RESEARCH FELLOW AT HEBEI UNIVERSITY, CHINA
Express Tribune
22-05-2025
- Business
- Express Tribune
Govt misses investment target
Listen to article Pakistan's investment ratio has slightly improved to 13.8% of the economy's size in the outgoing fiscal year but remained below the official target, as private investment stayed almost stagnant despite the government's multi-front efforts to attract non-debt creating foreign inflows. The Sovereign Wealth Fund remained dormant, while the Special Investment Facilitation Council's (SIFC) efforts also proved fruitlessboth vehicles had been set up two years ago to significantly boost investment. According to figures approved by the National Accounts Committee, investment as a percentage of the economy missed the official target again this fiscal year. Against a target of a 14.2% investment-to-GDP ratio, it remained at 13.8%, according to provisional figures. These will be officially released next Sunday at the launch of the Economic Survey of Pakistan. Still, the 13.8% figure marks an improvement from the previous year, when the ratio fell to a five-decade low of 13.1%. The Pakistan Democratic Movement (PDM) government had established the SIFC through an Act of Parliament to raise investment levels and remove growth bottlenecks. Despite year-long efforts, these have not yet produced tangible results. The government also established the Pakistan Sovereign Wealth Fund (PSWF) to attract investment from the Middle East. However, it remains non-functional due to disagreements with the International Monetary Fund (IMF) over its legal framework. SIFC has now shifted its focus toward resolving issues faced by domestic investors and helping the government formulate and implement economic policies. The fixed investment-to-GDP ratio also rose to 12%, up from last year's 11.4%, though still short of the official 12.5% target set in the previous budget. Private sector investment inched up to 9.1% of GDP, below the targeted 9.7%. The public sector investment-to-GDP ratio rose to 2.9%, contributing to the overall improvement. This assumes that the full Rs1.1 trillion development budget will be spent. Failure to meet the investment target limits the government's ability to address deteriorating infrastructure and social sector challenges using its own funds, resulting in increased reliance on loans for development. The savings-to-GDP ratio surpassed the official target of 13.3% and surged to 14.1% due to an anticipated current account surplus in this fiscal year. The IMF last week released its staff report, offering a detailed look into the workings of the SIFC and the Sovereign Wealth Fund. IMF projected foreign direct investment (FDI) for the fiscal year at 0.5% of GDPslightly lower than last year. In absolute terms, FDI is estimated at $2.1 billion this year. The IMF said that addressing the anti-export bias caused by restrictive trade policies and an ineffective tariff structure is central to unlocking Pakistan's competitiveness and attracting private investment. The government has again assured the IMF of its intent to amend the Sovereign Wealth Fund law and ensure transparency within the SIFC. According to Pakistan's commitment, "By end-March 2026 we will, in consultation with Fund staff, enact the necessary legal amendments to the PSWF Act and other legislation to strengthen the PSWF's legal framework, governance arrangements, and transparency and accountability mechanisms." To end ambiguity surrounding the Fund's legal standing, the government has assured the IMF that it will be defined as a state-owned enterprise (SOE) and made subject to the SOE Act. Other legal changes will also be made in the law to ensure the SWF's governance structures correspond with a holding entity's nature and mandate, and narrow its mandate to holding and managing SOEs on behalf of the state and creating value through their operational and financial improvement. The law will be amended to limit the wealth fund's role to attract foreign direct investment by facilitating and mobilising co-investment in strategic commercial ventures that generate financial returns in line with the SWF's investment mandate, while ensuring that the SWF and any sub-funds are neither the sole investors nor the first loss in any project, and that any investment is only motivated by financial risk-return considerations, according to the IMF report. The IMF report added that the revised legislation will ensure that all privatisation and procurement processes follow rules set by the SWF's Board. These rules must align with international best practices, ensuring open, transparent, competitive, and non-discriminatory procedures. Minimum disclosure requirements will be established for every stage of the process, including beneficial ownership. These rules will operate independently of government regulations but will generally align with official guidelines for divestment and procurement. Regarding the SIFC, the government assured the IMF that it would take additional measures to promote investment, maintain competitive neutrality, and ensure a level playing field. "We commit to ensuring that the SIFC does not propose, nor that the government provides, regulatory, spending, or tax-based incentives of any sort, or any guaranteed returns, or take any other action that could distort the investment landscape," the report stated. It added that all SIFC-led investments will follow the standard Public Investment Management framework.
Business Recorder
21-05-2025
- Business
- Business Recorder
FDI struggles persist
Pakistan attracted net foreign direct investment (FDI) worth $1.784 billion during the first ten months of FY25, marking a modest 3 percent year-on-year decline compared to the same period last year. The data, released by the State Bank of Pakistan (SBP), shows that despite high-level diplomatic efforts and structural policy interventions, particularly through the Special Investment Facilitation Council (SIFC), FDI continues to hover at historically low levels. The April 2025 numbers reinforced this concern—net inflows plunged by 91 percent year-on-year, falling to just $25.75 million, one of the lowest monthly figures recorded in recent years. In terms of source countries, China led the pack in April 2025 with a modest inflow of $27 million, reaffirming its role as Pakistan's largest investor. However, even this investment appears minimal given the claims made on the scale of bilateral economic cooperation under CPEC. The rest of the FDI landscape remains thin, with little to no significant traction from other major economies. The role of the SIFC has been central to Pakistan's has been in the limelight. According to recent government disclosures, the country has secured over $2.3 billion in investment since the launch of the SIFC, particularly targeting sectors like mining, agriculture, IT, and energy. While FDI of $2.3 in FY24 was a growth of over 50 percent year-on-year, the tally continues to be much lower than what the country attracted back in 2000s. Also, many a times such news reports also include early commitments and MoUs. The outlook for FDI in Pakistan remains challenging. Still, the investor confidence remains subdued amid broader structural issues: macroeconomic instability, weak contract enforcement, inconsistent taxation, and regulatory overreach. Global capital is increasingly cautious, and Pakistan's current risk-reward equation offers little differentiation in a competitive region. Neighbours like India, Vietnam, and Bangladesh continue to outperform Pakistan, driven by stronger industrial ecosystems, more predictable policies, and better ease-of-doing-business. The country needs deeper reforms focused on regulatory certainty, judicial efficiency, investor protection, and sector-specific facilitation. Without this foundation, flagship initiatives may only yield short bursts of interest but fail to catalyse the long-term capital Pakistan urgently needs.
Arab News
19-05-2025
- Business
- Arab News
Pakistan says $2 billion received since creation of special investment council
ISLAMABAD: Pakistan's Federal Minister for Parliamentary Affairs Dr. Tariq Fazal Chaudhry said on Monday that the country has received $2 billion in foreign investment since the Special Investment Facilitation Council (SIFC) was formed in 2023. Pakistan's government formed the SIFC in June 2023 to attract international investment in key economic sectors such as tourism, livestock, trade, infrastructure, mining and minerals. The government decided to form the hybrid civil-military forum after Islamabad narrowly avoided a sovereign default in 2023 before it was saved by a last-gasp bailout program by the International Monetary Fund (IMF). 'Since its inception, more than $2 billion in foreign investment has flowed into Pakistan, and our economic indicators are improving,' Chaudhry informed lawmakers during a question hour at the National Assembly, the lower house of Pakistan's parliament. Responding to a question by lawmaker Shazia Marri, Chaudhry said the SIFC played a crucial role in removing 'bureaucratic hurdles' that previously discouraged international investors. Answering a supplementary question from lawmaker Arshad Abdullah, the minister acknowledged that Pakistan's bureaucratic processes had long deterred global investors. 'In our system, even setting up a petrol pump requires 21 NOCs (no objection certificates), while in Indonesia, only one NOC is needed to establish an industry,' Chaudhry said. He stressed that the SIFC's goal is to eliminate such inefficiencies. 'We are moving from manual to automated systems to streamline investment processes,' he shared. Since its inception in 2023, the SIFC has also been instrumental in ensuring several trade and investment deals were signed between Pakistan and its regional allies Saudi Arabia and the United Arab Emirates were signed.
