fter a prolonged period of alarming instability, Pakistan’s economy has made significant strides towards a recovery. Through gradual consistent fiscal improvements, the country has managed to steer away from a critical economic crisis. To consolidate these gains and ensure a more resilient and sustainable economy, implementation of sound fiscal and monetary policies must continue without any disruption. The challenges ahead leave little room for delays or slippage. A lapse could easily lead to a reversal of the gains towards macroeconomic stability.
Entering the current financial year, Pakistan had set a clear objective to secure a new long-term extended fund facility (EFF) programme from the International Monetary Fund. In view of this objective, the federal budget was aligned with the targets set in the IMF staff level agreement. Passage of this budget was one of the “prior actions” for the new programme. Other crucial measures in this effort included the annual electricity tariff rebasing and semi-annual gas tariff adjustments.
Approved by the IMF’s Executive Board on September 27, the EFF programme is centred on restoring trust in Pakistan’s economic policymaking and achieving long-term macroeconomic sustainability as per IMF Country Report No 24/310, released on October 10. The report emphasises the need for a cohesive strategy that integrates fiscal, monetary and exchange rate policies. At the core of this strategy is the optimisation of public spending, ensuring that allocation of resources to critical sectors such as health and education is consistent.
This approach will help generate additional fiscal space for investment in these areas. A key aspect of this strategy is the creation of a fairer and more efficient tax system, particularly by focusing on sectors that are currently under-taxed. By broadening the tax base, Pakistan can enhance revenue generation and promote equity within the economy.
Reforms to foster a more conducive environment for private sector growth are also essential to the programme. Eliminating distortions created by the state and establishing a level playing field for all businesses........