In a desperate bid to stabilize its ailing economy and secure a crucial $7 billion loan from the International Monetary Fund (IMF), Pakistan has embarked on a series of austerity measures. These include slashing nearly 150,000 government jobs, closing down six ministries, and merging two others.
The IMF, on September 26, agreed to the assistance package and released an initial $1 billion after Pakistan pledged to implement stringent economic reforms. These commitments include slashing government expenditures, boosting the tax-to-GDP ratio, expanding the tax net to encompass sectors like agriculture and real estate, reducing subsidies, and transferring some fiscal responsibilities to provincial governments.
Finance Minister Muhammad Aurangzeb, upon returning from the United States, where the agreement was finalized, declared that this would be Pakistan’s last IMF program. He emphasized the need for effective implementation of these policies to demonstrate the country’s commitment to long-term economic stability. He underscored the importance of formalizing Pakistan’s economy to qualify for membership in the prestigious G20 group of nations.
The minister outlined the process of right-sizing government ministries, with the closure of six ministries and the merger of two already in motion. The job cuts will impact various government departments. Despite these drastic measures, Pakistan appears to be making some progress. The country has witnessed a surge in new taxpayers, with nearly 300,000 new taxpayers registered last year and 732,000 added so far this year. This increase in taxpayers has boosted the total number from 1.6 million to 3.2 million.
The finance minister, citing positive economic indicators, highlighted the growth in exports, including IT exports, and claimed an improvement in investor confidence, which he attributes to the strengthening economy. He also mentioned that government policies have successfully brought inflation down to single digits.
Pakistan’s economic troubles have been long-standing, and the country was perilously close to defaulting in 2023. The IMF’s $3 billion loan at that critical juncture averted a major crisis. While Pakistan hopes that the current IMF agreement is its last, skeptics remain. The country has a history of securing numerous IMF loans without achieving lasting economic stability. The success of these latest austerity measures in addressing Pakistan’s long-term economic challenges remains to be seen.
