A recent statement by the International Monetary Fund’s (IMF) Resident Representative in Islamabad has quietly but firmly punctured the government’s narrative of economic recovery.

Speaking at a policy discussion hosted by the Pakistan Institute of Development Economics (PIDE), the IMF official stressed the need for continued and credible reform efforts—not just to secure short-term macroeconomic stabilisation, but to build long-term economic resilience. This cautionary tone stands in sharp contrast to the repeated claims by Finance Minister Muhammad Aurangzeb and State Bank of Pakistan Governor Jameel Ahmed, who have both publicly declared that stability has already been achieved.

The divergence is significant because Aurangzeb and Ahmed are not merely commentators; they are the two signatories to the Letter of Intent that underpins Pakistan’s IMF programme and triggers the Fund’s Executive Board approval for the release of each tranche. When the IMF’s on-ground representative signals unfinished business while domestic authorities project closure and success, questions inevitably arise about credibility, data quality and policy direction.

In early November, Finance Minister Aurangzeb claimed in a press conference that Pakistan had achieved economic stability, citing upgrades by international rating agencies after a three-year gap. He argued that these agencies were now aligned not only on Pakistan’s current position but also on a “positive outlook.” This optimism was echoed by SBP Governor Jameel Ahmed, who has repeatedly pointed to declining inflation and an improved external account as evidence that stabilisation measures are delivering results. The Prime Minister has gone even further, publicly stating that the economy is now “out of the woods.”

However, two critical observations complicate this upbeat narrative. First, the IMF’s own October 2024 report highlights “important shortcomings” in Pakistan’s government finance statistics (GFS). According to the Fund, data weaknesses affect sectors accounting for roughly one-third of GDP, while issues of granularity and reliability undermine the overall credibility of fiscal reporting. These concerns were serious enough for the IMF to initiate technical assistance to address deficiencies in source data and reporting systems. Stability claims resting on shaky data are, by definition, fragile.

Second, ground-level industrial evidence tells a far less reassuring story. A recent and detailed survey found that major industrial subsectors—including textiles, cement and steel—have directly challenged the government’s assertion that large-scale manufacturing (LSM) grew by 5.02 percent year-on-year during July–October FY2025. If core industrial segments are contracting or stagnating, headline growth numbers lose much of their meaning, particularly in an economy where industry drives employment, exports and tax revenues.

The much-touted credit rating upgrades also deserve closer scrutiny. While positive in signalling reduced near-term default risk, the upgrades have kept Pakistan firmly within the “highly speculative” category. This classification explicitly denotes limited margins of safety, with debt servicing capacity vulnerable to adverse changes in the economic or business environment. In other words, the upgrades reflect temporary stabilisation rather than structural strength. Treating them as proof of durable recovery risks overstating progress and understating fragility.

It is also notable that, unlike in previous programmes, there was a lag between Pakistan’s rating upgrade and the approval of fresh IMF financing in October 2024. This delay reportedly reflected the Fund’s concerns about Pakistan’s historical pattern of abandoning reform programmes midstream due to political resistance and rolling back difficult measures once external pressure eases. These concerns underscore why the IMF continues to emphasise credibility and continuity rather than declarations of success.

Reports that the Prime Minister has directed ministries to form dedicated committees to renegotiate certain IMF conditions further reveal unease within the government itself. These efforts are aimed at persuading the Fund to soften or phase some of the harsh upfront measures that are widely seen as constraining growth—particularly in industry and agriculture. The IMF programme’s policy matrix remains heavily contractionary, combining tight monetary and fiscal policies with an insistence on full-cost recovery in utilities and the elimination of subsidies to both industry and the farm sector.

The rationale behind subsidy removal is familiar: past support mechanisms were poorly targeted, distortionary and ultimately left sectors uncompetitive and perpetually “infant.” Yet the abrupt withdrawal of support, coupled with record-high energy tariffs and borrowing costs, has imposed severe adjustment costs on productive sectors. This has fuelled the perception within the executive that IMF-mandated rigidity is anti-growth, even if it delivers short-term fiscal discipline.

Despite these tensions, it is unlikely that the IMF will fundamentally alter its current policy stance. However, some room for manoeuvre does exist. Pakistan’s economic managers could strengthen their negotiating position by demonstrating seriousness on politically difficult but economically necessary reforms. These include cutting current expenditure meaningfully—potentially by persuading powerful and influential sectors to voluntarily forgo at least 10 percent of their budgeted allocations—implementing long-delayed pension reforms instead of deferring them yet again, and tightening public procurement laws.

The latter is particularly important. The IMF’s Corruption and Governance Diagnostic report, uploaded on November 20 as a prior condition for the second tranche release, identifies procurement as a major source of corruption and fiscal leakage. Addressing this area credibly would not only save resources but also enhance the legitimacy of reform efforts in the eyes of both the IMF and the public.

Ultimately, the credibility gap between official optimism and lived economic reality must be closed. This requires more than upbeat press conferences or selective data points. The government needs to present transparent, reliable statistics that align with the quality of life experienced by ordinary citizens. It must also acknowledge the flawed policy choices of the past that underpin today’s structural problems—most notably the extraordinarily high utility tariffs driven by poorly negotiated contracts with independent power producers and long-term gas supply deals.

Overstating development spending while quietly slashing it when fiscal pressures mount, as happened in the first quarter of the current year, further erodes trust. Stability built on creative accounting and deferred reforms is inherently unstable. If Pakistan is to move from repeated stabilisation cycles to genuine resilience, honesty about constraints, consistency in reforms and credibility in data must replace declarations of having already arrived.