The IMF conditions for the release of the second tranche of its current Extended Fund Facility contain mainly a reiteration of the original conditionalities, but the setting up as a separate ‘structural benchmark’ (as it itself calls these 11 new demands) of the publication of a government plan, based on its Governance Diagnostic Survey, indicates that it is spreading from the economic side of government to all aspects. One already knows that the IMF makes the national budget; that is what Prime Minister Shehbaz Sharif has said. The benchmarks confirm this, for one of them is the passage of the Budget. In short, what has been promised must be included in the Budget and then duly passed. None of the tricks of the previous government, which dropped IMF suggestions if they were politically inconvenient, are to be practiced. Now, it seems, not satisfied with its complete hold of the budget and the State Bank of Pakistan, it wants to get into areas where the money is actually spent. The IMF should realize that it is setting itself up for failure. If the economy cannot be fixed by the IMF from its present vantage point, it is hardly going to do so by expanding its area of influence.
Another aspect of the IMF’s strategy is to lock into place the measures that it made Pakistan take, by making Pakistan prepare and publish a financial sector strategy after 2027, by June 2026, when the next financial year ends. The IMF also wants a resolution of litigation, especially those cases involving captive power plants and undercapitalized banks. It may be mentioned that Pakistan missed some of the targets that had been set when the EFF had been granted, but added that Pakistan was making progress.
The Prime Minister has said repeatedly that this IMF programme will be the last Pakistan receives. That may not be possible, for Pakistan is coming up to a period where it will need humungous amounts of foreign exchange to keep up with foreign debt servicing. Even now, the Finance Minister is in talks with banks in the Gulf for new loans. The IMF does not seem to have solutions for how to generate the necessary foreign exchange. One way is to increase exports. Another is to decrease imports. Yet one of the IMF benchmarks is allowing the import of used cars, apart from the abolition or reduction of tariffs. The one-size-fits-all approach will not work.
