SINCE 2022, the put in authorities has imposed, below the watch of the IMF, a crushing burden on peculiar Pakistanis by way of austerity coverage. A big fiscal adjustment has been carved out via large taxation and cuts in subsidies as an alternative of any trace of restraint in spending by the federal government both on itself or on its constituents and supporters. Quite the opposite, the spending valves have been opened like by no means earlier than. Discretionary expenditure has skyrocketed, a lot of it ‘pork barrel’ in nature, with public funds being lavishly used for patronage and cementing loyalties in the direction of the making of a brand new political order.
Within the course of, your entire burden of adjustment has been positioned on peculiar Pakistanis and tax-compliant corporations. In consequence, the nation is experiencing everlasting financial ‘scarring’, with companies shutting down, unemployment surging, and almost one out of each two Pakistanis now estimated to be beneath the poverty line. Even the nation’s farmers haven’t been spared, with rural poverty now estimated to be considerably increased than the remainder of the nation. Worse, the IMF’s orthodoxy is ready to consign Pakistan to a low-growth lure for years.
An examination of public funds since 2022 is revealing. A cumulative fiscal adjustment of 5.5 % of GDP has taken place, the most important over an identical interval in Pakistan’s historical past. A lot of this adjustment has come from new taxation measures. The federal government has imposed taxes and levies totaling over Rs50.4 trillion since 2022-23 (together with federal in addition to provincial taxes and the petroleum levy). That is equal to the cumulative tax assortment over the 17-year interval previous to 2022. Repeating the previous sample of failure, the extra taxation has not come via tax broadening however by putting calls for on present taxpayers.
On the similar time, whereas the federal government has been imposing unprecedented ranges of predatory taxation, it has been unable or unwilling to rein in its spending. Total authorities expenditure (centre and provinces mixed) has elevated by 60 per cent in nominal phrases between FY2023 and 2026. Non-interest expenditure has ballooned by 70pc throughout this era.
A lot of the rise in authorities expenditure has been within the type of political favors and patronage — massive will increase in salaries, allowances and pensions for the civil and army forms, parliamentarians, and the judiciary, along with allocation of beneficiant discretionary funds for MNAs and MPAs. Pork barrel-ridden ‘improvement’ spending, a surrogate approach of handing out taxpayer cash to ruling coalition politicians, has surged from Rs 1.9 trillion in 2022-23 to a budgeted Rs 3.1tr in 2025-26, inclusive of federal PSDP and provincial ADPs.
Pakistanis have been crushed by fiscal austerity whereas the ruling elite has by no means had it higher.
Expenditure on new fleets of vehicles, all-paid abroad journeys for embarrassingly massive delegations to totally different components of the world, lavish spending on places of work and official residences, and so on., is on prime of the foregoing. Personnel-related expenditure (salaries, allowances and pensions of the civil forms and army) alone has shot up from Rs 3.7tr to Rs 5.9tr previously 4 years, cumulatively accounting for 38pc of the taxes squeezed from the economic system over this era.
The huge enhance in authorities spending by itself constituents and institutional backers since 2022 has occurred below the watch of the architect of the fiscal austerity insurance policies — the IMF. Both the IMF is a witnessing occasion to this regime-supporting and system-legitimising operation, or it has been utterly negligent in its fiduciary accountability to peculiar residents of a member nation. Both approach it must be held accountable.
A key query is whether or not there was a greater various to the method adopted, one that may have positioned a decrease and extra bearable burden on the economic system and peculiar Pakistanis. The reply is an unequivocal sure. Spreading the burden of adjustment extra broadly and extra pretty via equitable taxation and non-essential spending cuts would have lessened the hardship.
Sadly, the IMF has chosen to show a blind eye to the federal government’s spending profligateness and unwillingness to broaden the tax base. In consequence, your entire burden of adjustment has fallen on the already taxed — salaried people, compliant corporations, much less prosperous Pakistanis. Worse, below the IMF’s cookie-cutter methodology, fiscal consolidation is the one method to deal with a public debt overhang. This method to realize a sustainable public debt degree, nevertheless, will consign Pakistan to a low-growth lure for years with out an exit.
As an illustration, utilizing the usual debt equation, and pretty benign assumptions about financial progress and actual rates of interest, reaching a focused degree of public debt at 60pc of GDP would require a major surplus of between 1.4 and 2pc of GDP every year for the subsequent 5 years. Underneath the present IMF methodology and forbearance, this major surplus will likely be achieved by much more taxation on present taxpayers.
A singular reliance on fiscal consolidation is exactly the method ‘the troika’ took within the case of Greece within the aftermath of the latter’s 2009 disaster, with the IMF below Christine Lagarde being a conscientious objector. Recognizing that with out vital debt restructuring, Greece’s economic system and inhabitants will undergo catastrophic penalties for many years, the IMF proposed a sovereign debt write-off. Nevertheless, Germany, as one of many largest collectors of Greece, overruled the concept and insisted on imposing fiscal austerity. The consequence has been the decimation of the Greek center class, a dramatic decline in general per capita earnings and widespread impoverishment.
To place Greece’s fiscal austerity-created distress into context, at its lowest level after the beginning of fiscal austerity, per capita earnings had declined by 27pc and solely recovered to its pre-crisis degree after 16 years.
In our case, the IMF has saved debt restructuring off the desk, despite the fact that if finished proper it could possibly present much-needed fiscal house whereas lowering the ache and struggling inflicted on residents. With no basic rethink of the present technique, and a change within the sham nature of the fiscal austerity being imposed, the economic system will proceed to be impaired for the long run, whereas peculiar Pakistanis will proceed to undergo needlessly.
The author has been a member of a number of previous financial advisory councils below totally different prime ministers.
Revealed in Daybreak, January third, 2026
