Azhar Rashid Khan

Summary:

Pakistan’s repeated IMF reliance has stabilised short-term crises but deepened structural dependency. Regulators’ failure to contain “socially sticky inflation” means profiteers escape accountability while the public shoulders both inflation and higher taxes.

There is no denying that the IMF has helped Pakistan avoid financial collapse more than once. Its stabilisation programmes offer short-term relief — preventing default, restoring confidence, and providing fiscal discipline.

Yet, this recurring dependence has come to define a dangerous pattern: Pakistan turns to the IMF in every crisis, implements a few conditions, and retreats until the next crisis arrives. The pattern is not economic reform; it is economic sedation.

Ignoring the facts for short- term gain will almost always bring long-term pain-Eldon Henson

IMF programmes act as a financial life-support system, buying temporary stability. But the conditions attached — subsidy cuts, higher taxes, and fiscal consolidation — squeeze ordinary citizens while pleasing creditors.

The labour force, already burdened by inflation and shrinking real wages, faces insecurity and job losses. The industrial sector, especially small manufacturers, struggles to compete when energy costs rise and protective incentives vanish overnight. The agriculture sector, still the backbone of our economy, falters as input subsidies disappear without alternative support — leaving small farmers exposed to market volatility and climate shocks.

The Inflation Trap and Regulatory Failure

Despite currency stabilisation and improved reserves, prices of essentials remain high. This “sticky inflation” is not purely economic; it is social and regulatory.

National and provincial regulators have failed to enforce price discipline or reverse unjustified mark-ups. The supply chain — from farm to market, and factory to retailer — remains dominated by middlemen and loosely controlled cartels. As a result, the benefits of a stronger rupee or lower import costs never reach the consumer.

When inflation becomes socially sticky, it corrodes public trust. People see that prices go up immediately with every rupee depreciation but never return to normal when the rupee recovers. The state’s silence in this imbalance breeds resentment and erodes legitimacy.

The Double Burden on Citizens

The ordinary citizen now bears a cruel double burden: paying inflated market prices and then paying higher taxes to fund fiscal gaps caused by regulatory failure. The injustice is stark — those profiting from market distortions continue to evade fair taxation, while salaried and fixed-income groups shoulder the state’s entire fiscal weight.

When regulators fail to curb profiteering, the cost of their failure should not fall on the public. The principle of fiscal justice demands that those responsible for socially sticky inflation — hoarders, speculative traders, and cartels — bear the burden of increased taxation.

Making Accountability Economic

Tax policy must become an instrument of corrective justice. Every rupee earned through artificial price inflation or exploitative mark-ups must be recaptured through targeted taxation.

In a fair system, the state does not punish the honest taxpayer for the regulator’s incompetence. Instead, it imposes compensatory taxes on those sectors that exploit crises for profit. If inflation has a social cause, it must also have a social cost — borne by those who perpetuate it.

“When regulators fail to protect citizens, taxation must become the tool of accountability — not punishment for the already burdened, but justice for those who exploit systemic weakness.”

The Way Forward: From Dependence to Discipline

Pakistan cannot treat the IMF as an economic home. It is, at best, a bridge — one that must lead toward self-reliance and structural reform. That requires domestic correction in six key areas:

1. Strengthen Domestic Revenue.

Reform the tax base through digitalisation, enforcement, and the inclusion of untaxed sectors. Shift focus from compliant taxpayers to rent-seekers and profiteers.

2. Protect the Labour Force.

Introduce targeted social protection — cash transfers, unemployment support, and skill training — so that fiscal reform does not translate into human hardship.

3. Modernise Industry.

Encourage industries to move up the value chain through phased incentives. Export growth must rely on innovation and technology, not wage suppression.

4. Reinforce Agricultural Resilience.

Retain targeted subsidies for small farmers, while investing in irrigation, drought-resistant seeds, and farm-to-market value chains. Food security is national security.

5. Enforce Regulatory and Fiscal Accountability.

Create empowered provincial price commissions to monitor value-chain distortions. Regulators must face parliamentary scrutiny when consumer prices remain unjustified. Where regulation fails, fiscal justice should prevail: tax those who benefit from inflated prices.

6. Diversify External Financing.

Engage with the IMF, but supplement it with Islamic sukuk, diaspora bonds, and climate-linked financing to avoid a single-source dependency.

Rebuilding Confidence from Within

Borrowing sustains budgets, not nations. Pakistan’s renewal depends on enabling its people to produce, innovate, and govern — not on recurring financial lifelines from abroad.

Economic sovereignty will not return overnight, but it will begin the day Pakistan stops transferring the cost of elite failure onto its citizens. A fair economy demands that accountability be both fiscal and moral — where those who profit from systemic inertia bear the price of reform.

The writer, Azhar Rashid Khan, PSP, is a former senior police officer and policy analyst focusing on governance, economic reform, and institutional resilience in Pakistan.