IMF Urges Pakistan to Deepen Reforms as Stability Alone Will Not Deliver Growth

Pakistan has done the hard work of steadying its economy. Now the International Monetary Fund (IMF) says the country must go further — much further — or risk sliding back into crisis once the current loan programme ends.

That was the clear message from Dr Mahir Binici, the IMF’s Resident Representative in Pakistan, at the closing session of the Sustainable Development Policy Institute’s (SDPI) 29th Sustainable Development Conference in Islamabad on Thursday, 5 November 2026.

Speaking at a plenary titled “Where Reforms Matter the Most for Growth”, Binici said Pakistan needed to move beyond macroeconomic stabilisation and take up deeper structural reforms — including getting the provinces to raise more of their own tax revenue, improving governance, restructuring the energy sector and cutting the cost of doing business.

The warning matters because Pakistan has been here before. The country has turned to the IMF again and again over the decades, each time stabilising the economy, and each time drifting back into trouble. The question now is whether this time will be different.

What the IMF is asking for

Binici set out five reform priorities for Pakistan: preserving macroeconomic stability, improving how public money is allocated, reducing the cost of doing business, building a tax system that supports growth, and strengthening governance.

His central point was simple. Stabilisation — bringing inflation down, rebuilding foreign exchange reserves and keeping the budget under control — is only the first step. On its own, it does not create jobs, lift exports or raise living standards. For that, Pakistan needs reforms that change how the economy actually works.

“Pakistan needed to translate macroeconomic stability into higher investment, productivity and exports,” Binici told the conference, according to the Newsman report of the session.

He said the country had already done the difficult task of restoring stability, but keeping those gains would require reforms that were well-sequenced and consistent — not started, stopped and reversed with every change of government.

The tax problem: Pakistan collects too little

One of the sharpest parts of Binici’s message was about tax. He said that emerging and developing economies such as Pakistan needed to collect revenue equal to at least 15 percent of gross domestic product (GDP) — the total value of everything a country produces in a year — to build a state strong enough to deliver basic public services. Pakistan, he said, remained considerably below that level.

That gap is not new, and the figures back it up. Customs Today reported on 3 November that the IMF considers Pakistan’s combined federal and provincial tax-to-GDP ratio of 11.1 percent insufficient, and wants it raised to at least 15 percent.

The IMF has also pressed the government to meet its annual revenue target of Rs15,264 billion. According to Federal Board of Revenue (FBR) sources cited by Customs Today, tax collections fell short by Rs129 billion in October alone, while the cumulative shortfall from July to October reached Rs96 billion.

Binici’s answer was that tax collection cannot stay a federal job alone. He urged provincial governments to expand their own revenue bases through three steps: harmonising the General Sales Tax (GST) on services, taxing agricultural income, and taxing property.

These are not new ideas. Agricultural income and property have long been lightly taxed in Pakistan, and GST on services is collected differently by each province, creating confusion for businesses that operate across the country. But they are politically sensitive — which is exactly why they have stayed untouched for so long.

The IMF has also directed the government to bring sectors currently outside the tax net into the formal system, particularly retail, wholesale and agriculture, along with professionals such as doctors, lawyers, engineers and chartered accountants. The message is that the burden of tax needs to spread wider, rather than falling again and again on the same salaried workers and formal businesses.

Where the money should go

Binici also spoke about how the government spends what it collects. He said improving the allocation of public resources was equally important, with more spending directed towards high-return infrastructure, healthcare, education and targeted social protection — and less towards inefficient and preferential activities.

In plain terms: the state should spend on things that help the economy grow and protect the poorest, rather than on subsidies and privileges that mostly benefit the well-connected.

Citing IMF research, he identified three areas where Pakistan could unlock significant growth: governance, national tariff policy and the business environment. High energy costs, heavy taxation and multiple layers of taxes, he said, were discouraging businesses from keeping their existing investments in Pakistan, starting new projects and bringing in foreign direct investment (FDI).

That last point matters for ordinary Pakistanis. When businesses do not invest, they do not hire. When foreign companies stay away, Pakistan misses out on new factories, new technology and new jobs.

The power sector: consumers are “voting with their pockets”

Some of the bluntest language at the conference came not from the IMF, but from former federal minister Syed Naveed Qamar, who warned that consumers were abandoning Pakistan’s inefficient power system — above all by installing solar panels.

Pakistanis had started “voting with their pockets” by moving away from the conventional electricity system, Qamar said, particularly through solarisation. He argued that policymakers were trying to preserve an archaic and inefficient system by shifting its financial burden onto other consumers, instead of fixing its structural weaknesses.

“People are simply walking away from this system. You’re trying to save an archaic and inefficient system by loading it on others,” he said, calling for urgent deregulation and competition in the power market.

Qamar pointed to the shifting of industrial consumers from gas to electricity as an example of flawed policymaking. Industries had not moved to the national grid as anticipated, he said: “People didn’t switch to the grid. All we did was take away all the paying customers of the gas companies and give them a whole bunch of unpaying customers.”

As a result, he said, circular debt — the pile of unpaid bills that builds up across the energy chain — had effectively been transferred from the power sector to the gas sector, without resolving the underlying inefficiencies.

His prescription was deregulation rather than privatisation alone, which he described as a lengthy and painful process. “For God’s sake, deregulate,” he urged, calling for more companies to be allowed to enter the power market and compete.

The September 2027 deadline

Qamar also sounded a warning about the calendar. He said Pakistan could face renewed economic instability after the existing IMF programme concludes in September 2027, unless the government begins preparing a transition towards sustainable, growth-oriented policies now.

Only around 18 months would separate the expected completion of the programme from the next general elections, he said, creating the risk of increased public spending and a reversal of economic discipline ahead of the electoral cycle.

Qamar cautioned that delaying the transition towards growth could result in a disorderly adjustment after the IMF programme ends, and urged the government to use the remaining programme period to build the institutions and policies needed for the future.

He also called for a fundamental overhaul of the education system, saying policymakers had focused too much on enrolment figures and the number of out-of-school children, while neglecting learning outcomes, practical skills and productivity. The existing curriculum, he said, remained rooted in an outdated model designed mainly to produce clerical workers rather than a skilled and productive workforce.

The boom-and-bust trap

Dr Emma Xiaoqin Fan, the Asian Development Bank’s Country Director in Pakistan, echoed the warning about Pakistan’s recurring cycle of crisis and recovery. She said consistent implementation of reforms, macroeconomic stability and private-sector-led growth were essential to break the country’s recurring boom-and-bust cycle.

Pakistan had experienced repeated economic expansions and crises since the 1990s, she said, without achieving significant improvements in per capita income, poverty reduction and people’s well-being.

Fan said the government needed to clearly define the respective roles of the public and private sectors, arguing that economic growth could not be generated merely through higher government expenditure. “The business of the government is not business,” she said, stressing that the government’s responsibility was to create an enabling environment, ensure stability and act as a catalyst for private investment.

She cited the privatisation of Pakistan International Airlines (PIA) as an example, saying a single transaction could not transform the economy — consistent progress across the broader reform agenda was required. Fan also called for civil service reforms to improve accountability, reduce unnecessary procedures and paperwork, and establish a more service-oriented approach within government institutions.

She cautioned that reforms inevitably involved short-term political and economic adjustment costs, requiring governments to provide education, training and social protection to workers affected by restructuring.

The 3.8 percent growth ceiling

Sam Waldock, Development Director at the Foreign, Commonwealth and Development Office (FCDO) at the British High Commission in Islamabad, identified export competitiveness as the key to breaking Pakistan’s recurring growth ceiling.

Pakistan’s economic growth, he said, repeatedly hit a ceiling of around 3.8 percent because imports outpaced exports, triggering balance-of-payments pressures and forcing the country back to the IMF.

That figure explains a great deal about Pakistan’s economic history. Whenever the economy grows faster than about 3.8 percent, Pakistanis buy more imported goods — fuel, machinery, raw materials — than the country earns from exports. The gap drains foreign exchange reserves, the rupee comes under pressure, and eventually the government has to call the IMF.

Waldock identified regulatory reforms, trade facilitation, trade promotion, market-oriented skills development and improved access to foreign exchange for exporters as five priorities for export-led growth. He highlighted weaknesses in export certification, documentation and branding, and dependence on foreign intermediaries — noting that Pakistan’s surgical instruments industry lacked laboratories certified to facilitate medical-device exports to the European Union.

Reforms must change real lives

Pernille Ironside, the Acting UN Resident Coordinator and UNICEF Country Representative, added a different measure of success. She said reforms should be judged by their tangible impact on people’s lives, rather than by policy announcements or financial allocations.

She called for outcome-based public spending, emphasising that reforms must deliver schools where children actually learn, effective healthcare services and inclusive employment opportunities.

That is a reminder that the debate about tax ratios and growth ceilings is not abstract. For most Pakistanis, the test of any reform programme is simple: does it make life better — cheaper electricity, better schools, more jobs — or does it just make the numbers look better?

What is the IMF programme?

For readers who want the background, here is where Pakistan stands with the IMF.

Pakistan is in a loan programme with the IMF that runs until September 2027. The programme, worth about $7 billion, was agreed to help stabilise an economy that had run dangerously low on foreign exchange reserves.

Under the programme, Pakistan has committed to raising more tax revenue, keeping energy prices closer to their real cost, and carrying out structural reforms — the same reforms Binici was talking about in Islamabad.

A staff-level agreement on the latest review was reached in October 2026, paving the way for access to about $1 billion, according to research published by KHI Stocks citing the IMF. Each review checks whether Pakistan is meeting its targets — and the tax shortfall reported in October shows how tight those targets are. The programme has helped stabilise the economy, but the IMF’s message this week is that stabilisation is the floor, not the ceiling.

Why this matters for ordinary Pakistanis

The debate at the SDPI conference may sound technical, but its consequences reach every household in the country.

If Pakistan raises its tax-to-GDP ratio towards 15 percent by widening the tax net, the burden on existing taxpayers could ease over time. If it does not, the same narrow group of salaried workers and formal businesses will keep paying more.

If the energy sector is restructured and opened to competition, electricity could become cheaper and more reliable. If it is not, consumers will keep leaving the grid for solar panels, and the cost of the system will keep falling on those who cannot afford to leave.

If exports grow, Pakistan can earn the foreign exchange it needs to pay for imports without borrowing. If they do not, the country will keep hitting the same 3.8 percent ceiling — and keep returning to the IMF.

And if the government uses the remaining months of the programme to build the institutions for growth, the end of the programme in September 2027 could be a graduation. If it does not, it could be the start of the next crisis.

What happens next

The immediate test is the tax target. With collections already short by Rs96 billion in the first four months of the financial year, the government will need to either raise more revenue or cut spending — or face tougher conditions in the next IMF review.

The bigger test is political. The reforms Binici listed — provincial taxation, agricultural income tax, property tax, energy deregulation, civil service reform — are all politically difficult. They touch powerful interests, and they take time to show results.

The conference itself has now ended. Its theme this year was “Rethinking Development in an Age of Disruption”, and the closing plenary asked which reforms matter most for growth. The speakers’ answer, in different words, was the same: the ones that change how the state raises money, spends money and lets businesses operate.

Whether Pakistan’s leaders act on that answer will decide whether the stability of the past two years becomes the foundation for lasting growth — or just another pause before the next crisis.

Frequently asked questions

What did the IMF say about Pakistan on 5 November 2026?

Dr Mahir Binici, the IMF’s Resident Representative in Pakistan, told SDPI’s 29th Sustainable Development Conference that Pakistan must move beyond macroeconomic stabilisation and undertake deeper structural reforms, including provincial tax mobilisation, governance improvements, energy sector restructuring and reducing the cost of doing business.

What is the IMF’s tax target for Pakistan?

The IMF says Pakistan needs to raise revenue to at least 15 percent of GDP. Pakistan’s current combined federal and provincial tax-to-GDP ratio is about 11.1 percent, according to Customs Today.

When does Pakistan’s current IMF programme end?

The existing IMF programme concludes in September 2027. Former minister Naveed Qamar warned that Pakistan could face renewed instability after the programme ends unless the government prepares a transition to sustainable, growth-oriented policies.

Why does Pakistan keep returning to the IMF?

Pakistan’s growth repeatedly hits a ceiling of around 3.8 percent because imports grow faster than exports, creating balance-of-payments pressure. When foreign exchange reserves run low, the government turns to the IMF for support.

What are the five reform priorities the IMF listed?

Preserving macroeconomic stability, improving the allocation of public resources, reducing the cost of doing business, developing a growth-friendly fiscal system, and strengthening governance.

Sources

• Newsman, “SDPI SDC: IMF urges deeper reforms, provincial tax mobilization”, 5 November 2026: https://newsman.pk/sdpi-sdc-imf-urges-deeper-reforms-provincial-tax-mobilization/
• Customs Today, “IMF presses Pakistan to meet Rs15.26tr tax target”, 3 November 2026: https://customstoday.media/imf-presses-pakistan-to-meet-rs15-26tr-tax-target/
• Mettis Global, “Pakistan, IMF discuss major tax reforms to boost economic growth”, 20 October 2026: https://mettisglobal.news/Pakistan-IMF-discuss-major-tax-reforms-to-boost-economic-growth-64343
• Sustainable Development Policy Institute, “Where Reforms Matter the Most for Growth?” (29th SDC closing plenary programme): https://sdpi.org/
• Daily Frontier Star, “‘Rethinking Development in an Age of Disruption’; SDPI’s four-day 29th SDC opens on November 02”, 2 November 2026: https://dailyfrontierstar.com/rethinking-development-in-an-age-of-disruption-sdpis-four-day-29th-sdc-opens-on-november-02/

This article is for general information and education only. It is not legal or financial advice.