Pakistan has climbed out of its economic crisis — but the hardest work is still ahead. That was the blunt message from the International Monetary Fund‘s representative in Islamabad this week, who warned that stability alone will not deliver the growth Pakistan needs, and that the country could slide back into trouble once the IMF programme ends.
Dr Mahir Binici, the IMF’s Resident Representative for Pakistan, was speaking at the closing session of the Sustainable Development Policy Institute’s 29th Sustainable Development Conference in Islamabad on Thursday, 5 November. His message was clear: Pakistan has done the difficult job of restoring macroeconomic stability, but turning that stability into higher investment, productivity and exports will need deeper, well-sequenced structural reforms — and the clock is ticking.
Stability is restored — now comes the hard part
Binici told the conference, titled “Where Reforms Matter the Most for Growth”, that Pakistan must now move beyond stabilisation. Sustaining the gains made so far, he said, requires consistent structural reforms carried out in the right order — not one-off fixes.
He set out five reform priorities for the country: preserving macroeconomic stability, improving how public resources are allocated, reducing the cost of doing business, building a growth-friendly tax system, and strengthening governance. None of these, he made clear, is optional. Without them, stability stays fragile — a pause between crises rather than the start of lasting growth.
The warning matters because Pakistan has been here before. The economy has repeatedly expanded and then run into crisis, and each time the country has returned to the IMF for support. Breaking that cycle is the real test of the current recovery.
Growth is back — but it keeps hitting a ceiling
The IMF sees Pakistan’s economic growth reaching 3.5% in the current fiscal year, according to its October World Economic Outlook. The economy grew by about 3.6% in the last fiscal year, and the government is targeting 4% growth — with Finance Minister Muhammad Aurangzeb expressing confidence that growth can exceed that target.
But the Fund also raised its inflation forecast for Pakistan to 9.9% for the current fiscal year, up from 8.4% in its earlier assessment — a reminder that price pressures have not gone away.
And there is a deeper problem with the growth number itself. Sam Waldock, Development Director at the British High Commission in Islamabad, told the same conference that Pakistan’s growth repeatedly hits a ceiling of around 3.8% because imports grow faster than exports. That triggers balance-of-payments pressure — and forces the country back to the IMF. Until exports grow, he argued, every recovery runs into the same wall.
Tax: the provinces must do their share
One of Binici’s sharpest points was about tax. Emerging and developing economies, he said, need to mobilise revenues of at least 15% of GDP to build a state capable of delivering basic public services. Pakistan remains considerably below that threshold.
Crucially, he said the job cannot be left to the federal government alone. Provincial governments must expand their own revenue bases — by harmonising the general sales tax on services, by taxing agricultural income, and by taxing property. These are areas where Pakistan’s revenue potential remains largely untapped, and the IMF has repeatedly urged the country to widen its narrow tax base and share the burden more fairly.
Binici also stressed that how public money is spent matters as much as how much is collected. Greater spending should go to high-return infrastructure, healthcare, education and targeted social protection — not to inefficient and preferential activities that drain resources without delivering results.
Energy costs are driving business away
The cost of energy came up again and again at the conference. Binici said high energy costs, heavy taxation and multiple layers of taxes are discouraging businesses from keeping their existing investments, starting new projects, or bringing foreign direct investment into the country.
Former federal minister Syed Naveed Qamar offered an even sharper assessment. Consumers, he said, are increasingly abandoning the country’s inefficient power system — “voting with their pockets” — by switching to solar power and other alternatives. Policymakers, he argued, are trying to preserve an archaic and inefficient system by shifting its financial burden onto other consumers instead of fixing its structural weaknesses.
Qamar pointed to the shifting of industrial consumers from gas to electricity as an example of flawed policymaking. Industries did not move to the national grid as anticipated, he said — instead, the paying customers of gas companies were taken away and replaced with non-paying ones. The result, he said, is that circular debt has effectively been transferred from the power sector to the gas sector without resolving the underlying inefficiencies. His prescription was blunt: “For God’s sake, deregulate” — let more companies enter the power market and compete.
The 2027 warning — programme ends, elections near
The most serious warning of the day was about what happens after the IMF programme ends. Binici and Qamar both cautioned that Pakistan could face renewed economic instability once the existing programme concludes in September 2027, unless the government starts preparing a transition towards sustainable, growth-oriented policies now.
Qamar noted that only around 18 months would separate the expected completion of the programme from the next general elections — creating the risk of increased public spending and a reversal of economic discipline ahead of the electoral cycle. Delaying the transition towards growth, he warned, could result in a disorderly adjustment after the IMF programme ends. The remaining programme period, he said, should be used to put the necessary institutional and policy framework in place.
Dr Emma Xiaoqin Fan, the Asian Development Bank’s Country Director in Pakistan, made a similar point. Consistent implementation of reforms, macroeconomic stability and private-sector-led growth are essential to break the country’s recurring boom-and-bust cycle, she said. Pakistan has experienced repeated economic expansions and crises since the 1990s without achieving significant improvements in per capita income, poverty reduction or people’s well-being. “The business of the government is not business,” she said — the government’s job is to create an enabling environment, ensure stability and act as a catalyst for private investment. She added that a single transaction, such as the privatisation of Pakistan International Airlines, cannot transform the economy on its own.
What happens next
The immediate focus now turns to the IMF’s next review of Pakistan’s programme. The Fund’s staff reached a staff-level agreement with Pakistan in October, and the fourth review of the Extended Fund Facility is expected to commence shortly. The programme’s third review was completed in May 2026.
The reserves position gives the government some breathing room — the State Bank’s foreign exchange reserves rose to $21.56 billion by 30 October, their third weekly gain. But reserves alone do not fix the structural problems Binici listed: a narrow tax base, expensive energy, weak governance and an export sector that cannot keep pace with imports.
The message from Islamabad’s conference halls this week was unusually direct. Stability has been won. Whether it lasts — and whether it turns into jobs, exports and rising incomes — now depends on reforms that go far beyond stabilisation. The IMF’s man in Pakistan has said so plainly. The question is whether the government acts on it before the programme clock runs out.
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