THE current IMF programme is scheduled to conclude in the latter half of 2027, yet, the debate about how effective it is has already begun. Many ask whether the IMF’s policy framework is responsible for sluggish growth, unemployment, poverty and inequality. But framing the issue in purely economic terms risks missing the deeper problem. Pakistan’s recurring economic crises are not simply the outcome of flawed technical policies or IMF conditionalities. They are symptoms of a far more fundamental challenge: a crisis of leadership that permeates the political and institutional landscape. It is institutional rot that runs deep. Unless addressed, Pakistan will continue to oscillate between temporary stabilisation and renewed economic distress.
Over the decades, successive governments have treated economic management as a short-term exercise in crisis control rather than a coherent national strategy. The prevailing approach has been narrowly focused on reducing the fiscal deficit — often without curbing wasteful public expenditure — and compressing the current account deficit through import compression and capital controls. Stabilisation programmes are typically implemented reluctantly under external pressure and abandoned once immediate pressures subside. The political will for sustained reform dissipates just as conditions begin to improve.
This weak policy framework is compounded by the appointment of finance ministers drawn frequently from the banking sector, whose background in corporate finance does not necessarily translate into an understanding of public finance and broader economic welfare. Some finance ministers and central bank governors recruited from IFIs brought technical credentials but little empathy for ordinary citizens; once in office, their priorities shifted towards networking with the powers that be rather than serving the public interest. Appointing businessmen-cum-politicians to the helm of economic ministries creates direct conflicts of interest at the expense of public policy.
Political leaders appear less focused on governance and more on consolidating power.
In a country where 45 per cent of the population lives in poverty, bank CEOs and senior executives pocket obscene pay and perks while their own middle management and operational staff remain modestly compensated. Yet for all this reward, their contribution to the real economy remains marginal, as the data makes plain. The private sector credit-to-GDP ratio has fallen from 27pc in 2008 to just 8.7pc in 2025, the lowest among emerging economies. SME financing has dropped from 17pc in the mid-2000s to just 6pc. Exports have stagnated at around 10pc of GDP, down from 17pc two decades ago. Meanwhile, banks post substantial profits even in downturns — a reflection not of dynamism but a captive, rent-seeking financial system.
The political leadership appears less focused on governance and more on consolidating power: extending tenures and granting promotions to the powerful, while dispensing awards to the compliant. Parliament has become a rubber stamp, ready to pass any law dictated from the top, without applying its mind. Sadly, flattery, both at home and abroad, has become a defining trait. To the public, these political faces appear inept, their authority lacking legitimacy due to the controversial elections of 2024. Consequently, critical structural reforms, including taxation, industrial policy, agricultural productivity, privatisation of loss-making SOEs and rationalisation of an overextended bureaucracy remain deferred exercises.
The leadership deficit extends well beyond politics. Dynastic politics have deeply politicised the civil service, establishing systems of patronage and sycophancy. Loyalist civil servants are rewarded with lucrative postings, not for public service but for unwavering fidelity to political patrons. The most loyal are inducted into the cabinet after retirement, sending a clear message to the bureaucracy: loyalty pays. The result is a perverse incentive structure. Capable and conscientious officers are sidelined, institutions are hollowed out, and decision-making becomes erratic and performative. Crises like floods and sugar and flour shortages present opportunities for rent-seeking, not public relief. Pakistan does not lack capable people. It lacks a system willing to use them.
The judicial system has been effectively decimated by the 26th and 27th constitutional amendments, which serves the interests of powerful individuals. High courts have remanded pending cases to district courts that lack the capacity to absorb them. District courts across Pakistan now carry over two million pending cases, with more than 1,100 judicial positions vacant, denying justice to the aggrieved. Without rule of law and contract enforcement, no economy can flourish.
Boards of SOEs, regulatory bodies, banks, and major corporates are populated by serving and retired officials handpicked through personal networks rather than merit, collecting exorbitant fees for attending meetings while contributing little to oversight or strategy. Intellectual honesty has also eroded: senior officials and advisers often tailor their advice to what political leaders wish to hear. Public debate is shaped by partisan narratives rather than evidence.
Real transformation begins with self-reflection and internal reform. IMF programmes and support from international donors may provide temporary financial relief, but they cannot substitute for domestic leadership. China, Singapore, South Korea and Malaysia demonstrate how visionary leadership, investment in education and institutional discipline can transform national trajectories. As Henry Kissinger observed, “Leadership is needed to help people reach from where they are to where they have never been… . Without leadership, institutions drift, and nations court growing irrelevance and ultimately disaster.”
Pakistan’s economic problems are not merely technical or financial; they are reflections of a broader crisis of governance. The country possesses immense potential: an energetic population, entrepreneurial talent and strategic geographic location. But unlocking this potential requires leadership capable of strengthening institutions, promoting merit and fostering long-term national vision. Pakistan is not short of capable individuals. Their exclusion in favour of political mediocrity continues to erode national capacity. The state must belong to the people, not to a club of the self-serving.
The writer is a former senior adviser to the IMF. He is the author of The Shady Economics of International Aid.
Published in Dawn, June 15th, 2026