IMF urges Pakistan to move beyond fiscal targets

ISLAMABAD—The International Monetary Fund (IMF) has urged Pakistan's fiscal policy to transcend primary balance targets and debt sustainability safeguards by bolstering policy credibility, stimulating economic recovery, and granting resources for public investment and social spending to spur robust long-term growth. At a workshop on "Reforms for a Modern and Growth-Friendly Tax System in Pakistan," IMF Middle East and Central Asia Department Director Jihad Azour emphasized that tax reform is paramount to Pakistan's economic growth agenda and remains central to the objectives of the Extended Fund Facility (EFF).

Organized by the Ministry of Finance and Revenue in collaboration with the IMF, the workshop saw Finance Minister Muhammad Aurangzeb sharing his government's recent accomplishments.

Azour commended Pakistan's recent stabilisation gains, which have restored macroeconomic stability, rebuilt confidence, strengthened external buffers, and supported a gradual economic recovery despite a series of shocks and uncertainty. He called for transformative reforms to cement these gains, with tax reform at its core. "A stronger, broader, fairer, and more predictable tax system can foster fiscal sustainability while curbing distortions that hinder investment, productivity, growth, and formal job creation," Azour emphasized.

He highlighted Pakistan's progress but stressed that the next crucial step is transitioning from stabilization to stronger, more durable growth by moving beyond adjustment cycles toward a more competitive, investment-friendly, and inclusive economy.

Azour noted that the IMF remains committed to assisting Pakistan in building an economy capable of delivering higher productivity, driven by a stronger private sector, and generating better opportunities for the younger generation. He cautioned that the highly uncertain external environment has made these objectives more urgent.

Fiscal policy, according to Azour, must go beyond achieving primary balance targets and protecting debt sustainability. It must enhance policy credibility, foster recovery, and create space for public investment and social spending necessary to support long-term growth and public welfare. During the two-day workshop, Azour outlined four key themes for discussion: credibility, growth, fairness, and implementation.