THE IMF Executive Board’s approval of the second review of its Extended Fund Facility and the first of the arrangement under the Resilience and Sustainability Facility, leading to the disbursement of $1.2bn, must strengthen Pakistan’s balance-of-payments position and support its efforts to boost international reserves.

A media report, however, suggests that the lender’s approval could not have been possible without it granting Islamabad waivers as it had failed to meet certain key targets related to tax collection, BISP disbursements, primary budget surplus, and so on.

That said, the programme’s policy priorities continue to remain focused on maintaining macroeconomic stability, advancing reforms to strengthen public finances, enhancing competition, raising productivity and competitiveness, bolstering the social safety net, reforming SOEs, keeping inflation in check, and improving public service provision and energy sector viability. The Fund has also commended the authorities for “maintain[ing] stability and improv[ing] financing and external conditions” despite the catastrophic floods.

Prime Minister Shehbaz Sharif has touted the approval for disbursement as validation of “collective sacrifice”, contending that political unity and public endurance had helped avert a sovereign default. That may be true. But what is being repeatedly framed as ‘economic recovery’ by Mr Sharif and his finance managers is far from what this refrain denotes.

The programme projections for the present fiscal year themselves tell a more sobering story: the firefighting phase may be over, but the path ahead is one of economic containment, not recovery. Inflation has eased, foreign exchange reserves are improving, the current account remains manageable, and the budget deficit is expected to narrow further. Technically, macroeconomic indicators have stabilised and the threat of default averted.

However, the hard-won gains stand on very weak foundations: debt rollovers from ‘friendly’ countries and remittances. The country remains trapped in a low-growth trajectory with the GDP increasing at a much slower pace than the population. Fiscal consolidation comes at a huge cost to the salaried class and compliant businesses; the external balance remains manageable thanks to significant growth in remittances and extensions in debt rollovers; and non-debt-creating foreign private investment hovers around 0.5pc of GDP in a country of 250m.

While investment, productivity and exports continue to fall, poverty levels are increasing, with international lenders saying nearly half the people now live below the poverty line. Unemployment is on the rise. Is this economic recovery?

Indeed, the government has pursued reforms under the IMF agenda. But most reforms can hardly be labelled as such, while others have barely scratched the surface of structural issues. That the government had to seek waivers for missing some targets speaks volumes about the painfully slow pace of reforms and the limited ability to tackle deep-seated systemic rot.

Published in Dawn, December 10th, 2025