Dialogue on growth beyond IMF limits

Islamabad : Economic consultant Dr Khurram Ejaz presented a comprehensive overview of the current noted that Pakistan's economy has faced a multitude of external and internal shocks, including post-pandemic disruptions, the Russia-Ukraine conflict and the devastating 2022 floods.

Dr Ejaz was speaking at a seminar on “Balancing stabilisation and growth under URAAN Pakistan” organised here Pakistan Institute of Development Economics (PIDE).

Featured a panel comprising Dr. Muhammad Arshad (Chief, Macro), and Naila Dar (Deputy Chief), all representing MoPD&SI.

Dr Ejaz said these factors pushed the country toward fiscal and balance-of-payment crises, culminating in the signing of an Extended Fund Facility (EFF) with the IMF in September 2024. The IMF programme emphasised restoring macroeconomic stability through fiscal tightening, monetary policy and external sector stabilisation, he said adding that while it succeeded in curbing inflation and modestly reviving growth (estimated at 2.7%), it limited the fiscal space for development spending (PSDP capped at 2.6% of GDP).

He contrasted this with the ambitious targets of URAAN Pakistan which envision 6% GDP growth by 2029 with significantly higher employment generation. He acknowledged a critical financing gap between what is possible under the IMF framework and what URAAN Pakistan aspires to achieve. He proposed five initial strategies to bridge this gap: repositioning Development Finance Institutions (DFIs) to fulfill their core mandate rather than investing in low-risk securities, migrating suitable PSDP projects to Public-Private Partnership (PPP) mode to crowd in private capital, issuing diaspora, green and SDG-linked bonds to unlock innovative financing, devolving social sector expenditures to provinces in a phased manner and reducing losses from State-owned Enterprises (SOEs) and monetising non-strategic public assets like ports under a structured asset recycling programme.

Dr Nasir Iqbal questioned the underlying assumption that low growth is due to limited PSDP spending. He argued that productivity, export orientation and youth engagement are more critical to sustained growth than merely increasing public investment. He recommended establishing village-level economic zones, leveraging idle public infrastructure and simplifying business registration to boost local entrepreneurship.

Dr Karim Khan emphasised that IMF programmes and growth are not inherently contradictory and that sustainable growth must be private sector-led. He called for leveraging CPEC Phase II and capitalising on productive investment avenues.

Dr Shujaat Farooq added that governance reform and performance-based budgeting are crucial. He highlighted a disconnect between Planning and Finance Ministries and stressed the need to engage provinces, whose PSDPs now exceed the Federal Government’s in size.