The International Monetary Fund (IMF) has long been a controversial figure in global finance, often criticized for imposing harsh conditions on indebted nations. Pakistan, a frequent borrower, has once again found itself under the IMF’s scrutiny, with the latest bailout package demanding significant economic reforms. However, these reforms have come at a steep cost for the Pakistani people, as the government has implemented policies that have led to soaring inflation, increased poverty, and widespread economic hardship.

The financial remedies prescribed by the International Monetary Fund (IMF) frequently impose substantial burdens on ordinary citizens, a reality underscored in Finance Minister Mohammad Aurangzeb’s written testimony presented to the National Assembly committee. The administration, adhering to the IMF’s fiscal stabilization agenda, has orchestrated substantial hikes in electricity and gas tariffs. Data unveils an astronomical 840% surge in gas prices and an over 110% escalation in electricity costs, compounded by a 43% devaluation of the currency since the commencement of the Extended Fund Facility arrangement in 2019. These adjustments have catapulted inflation to unprecedented levels, stifling economic momentum and disproportionately impacting middle-income households.

The relentless uptick in living expenses, driven by elevated inflation rates in recent years—consumer price inflation soared to 29.2% in FY23 and remained at 23.4% in FY24, a stark contrast to the more modest 8.9% in FY21—has stripped many individuals of their capacity to afford even the most basic necessities. Consequently, families are being forced to drastically curtail expenditures on essential needs such as food, healthcare, and education. While the IMF’s stringent stipulations are a significant factor in the escalating prices of indispensable goods and services, they are far from the sole culprit. The government’s economic and fiscal strategies, which often prioritize the interests of affluent elites, have substantially exacerbated the plight of the average citizen. Policies granting tax concessions and exemptions to the wealthy, along with subsidies that support their lavish import-centric lifestyles, have magnified the economic strain on those grappling to survive. Additionally, the central bank has, on multiple occasions, delayed raising interest rates to rein in spiraling prices, ostensibly to placate influential business factions reluctant to relinquish access to inexpensive credit.

Furthermore, repeated interventions to artificially stabilize the exchange rate, ostensibly to facilitate cheaper imports, have plunged the nation into recurrent balance-of-payments predicaments, perpetuating inflationary spirals. Despite a recent slowdown in inflation, calls for renewed energy, fiscal, and interest rate subsidies by the business elite have resurged, placing additional pressure on a government already contending with mounting economic and political unrest. This unrest threatens to erode whatever semblance of political goodwill remains.

While it is convenient to fault the IMF for the prevailing economic turbulence, the more arduous task lies in self-scrutiny and implementing corrective measures—a challenge the nation’s leadership appears hesitant to confront.

The government has enacted steep hikes in electricity and gas tariffs, with gas prices surging by a staggering 520% in November 2023, followed by an additional 319% in February 2024. Electricity charges similarly climbed by 35% in November 2023 and escalated by 75% in February 2024. These extraordinary increases have driven inflation to unprecedented levels during fiscal year 2024. Historically, successive administrations have refrained from raising utility tariffs due to political considerations, exacerbating the burden when adjustments eventually become unavoidable.

For instance, in 2018, the newly-installed government was compelled to increase utility rates by over 100% as a precondition for securing an IMF loan. This move was necessitated by the preceding PML-N government’s failure to adjust tariffs. Similarly, in 2022, the PTI-led administration maintained constant rates despite soaring international gas and fuel prices triggered by the Russia-Ukraine conflict, again prioritizing political expediency. From March 2022 to mid-August 2023, the Pakistan Democratic Movement (PDM) government also avoided making politically sensitive adjustments. However, the steep tariff hikes observed from November 2023 to February 2024 were ultimately enforced under the interim caretaker government.

This pattern of delay only exacerbates costs for consumers, amplifying the political fallout unless the economy is stable and independent of donor support. Over decades, across both civilian and military administrations, the absence of structural reforms in key sectors—power, fuel, and taxation—combined with deteriorating governance and ballooning non-development expenditures, has perpetuated the nation’s economic fragility. Reliance on domestic and international borrowing has steadily increased, further undermining economic resilience.

The chronic failure to address these structural deficiencies has left donor agencies less amenable to flexibility. Today, external financiers demand rigid adherence to measures such as consumer tariff adjustments to achieve full cost recovery. This rigidity stems from the widening gaps in external financing and persistent economic vulnerabilities. As with previous governments, the current administration has passed the financial burden onto the general populace, whose ability to endure such increases has been severely diminished. According to World Bank statistics, 41% of Pakistan’s population now lives below the poverty line, underscoring the dire economic strain. Beyond tariff hikes, other budgetary measures have also fueled inflation. For example, over 90% of allocated funds are directed toward current expenditures, primarily financed through borrowing. This has led to significant reductions in development spending, further compounding inflationary pressures and leaving the public with an ever-worsening economic outlook.

The IMF’s stringent conditions, coupled with the government’s own economic mismanagement, have pushed Pakistanis to the brink of economic collapse. The burden of these reforms has fallen disproportionately on the shoulders of ordinary citizens, who are struggling to cope with rising prices, unemployment, and poverty. While the IMF may provide short-term relief, the long-term consequences of these policies could be devastating for Pakistan’s economy and society. It is imperative that the government takes bold steps to address the root causes of the country’s economic problems and implement sustainable reforms that benefit all segments of society.