IMF calls for reforms in Pakistan to reverse declining living standards

WEB DESK: The International Monetary Fund (IMF) has urged Pakistan to shift away from its state-controlled economic model and create a more business-friendly environment with open competition, in a bid to reverse the ongoing decline in living standards.

According to a new IMF report, this shift is crucial for improving economic performance and quality of life in the country.

The IMF’s Executive Directors emphasized that Pakistan must build strong public support for reforms, focusing on transforming state-owned enterprises (SOEs), removing trade barriers, and improving governance.

They also highlighted the importance of strengthening Pakistan’s resilience to climate change by following through with climate action plans and increasing investments in climate adaptation.

On the fiscal side, the IMF called for steady progress in managing Pakistan’s debt and implementing the FY25 Budget without policy missteps. Achieving sustained economic stability requires ongoing efforts to strengthen tax collection, expand the tax base, and manage public spending wisely.

The IMF welcomed recent reforms towards a fairer tax system but stressed the need for further improvements to mobilize more revenue for key areas like education, infrastructure, and social welfare.

The report also touched on the energy sector, urging reforms to ensure its sustainability by using cost-based tariffs and improving debt and liquidity management. The IMF appreciated Pakistan’s tight monetary policies aimed at reducing inflation but noted the need for continued vigilance in managing financial stability, including improvements in banking regulations.

In September, the IMF’s Executive Board concluded its 2024 review of Pakistan’s economy and approved a 37-month Extended Fund Facility (EFF), worth about $7 billion, to help the country stabilize. The approval came with an immediate disbursement of around $1 billion.

The IMF stressed that Pakistan must maintain a firm commitment to reforms and continue collaborating with development partners to ensure long-term economic recovery and growth.

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