ISLAMABAD - The recent approval of the International Monetary Fund (IMF) program is poised to politically benefit Pakistan’s ruling coalition, according to Asfandyar Mir, an expert at the United States Institute of Peace (USIP). Mir highlighted that the IMF program is expected to provide macroeconomic stability and boost confidence among Pakistan’s key economic partners — including China, Saudi Arabia, and the United Arab Emirates — whose economic support and investment are contingent upon Pakistan’s ongoing involvement with the IMF.
“The fact that the coalition government managed to agree on a range of economic adjustments and secure the IMF’s endorsement for a new program demonstrates that it holds more political weight than that initially perceived,” Mir said in a statement on Thursday, referencing earlier skepticism that the PML-N-led government was too weak to implement meaningful economic reforms. He added that the program’s long-term nature would allow the government to signal that the macroeconomic crisis that plagued the country over the past two years is now under control, creating some political breathing room. The IMF program’s approval also validates the decision to appoint Muhammad Aurangzeb, a technocrat outside the PML-N, as finance minister. His predecessor, Ishaq Dar, had struggled to secure favourable negotiations with the IMF. However, Mir cautioned that while macroeconomic stability is a win for the government, the IMF-mandated reforms are unpopular among many Pakistanis. The removal of subsidies and new tax measures — particularly concerning electricity — are widely seen as disproportionately burdening the working class, while the elite are perceived to have secured exemptions. “The sentiment that Pakistan’s elite have once again evaded the brunt of the economic pain could generate anger against the government,” Mir noted. The expert emphasized that the overall political impact of these reforms remains uncertain, as it is difficult to predict whether the benefits of macroeconomic stability will outweigh the public backlash over unpopular measures. A potential easing of economic turbulence, aided by falling global oil prices and increased foreign remittances, could help stabilize the political environment.
On the international front, Mir observed that Pakistan’s relationship with the IMF is deeply entwined with its foreign relations. He pointed to concerns among Pakistani leadership that the United States had been using the IMF to apply geopolitical pressure, particularly due to Islamabad’s close ties with Beijing. Mir explained that the approval of the IMF program would likely be interpreted as a sign of US support, easing tensions in US-Pakistan relations. Simultaneously, China’s role in providing external financial assurances and debt rollovers was crucial in securing the IMF deal, reinforcing the economic partnership between Pakistan and China. Mir concluded by stating that Pakistan’s return to a long-term IMF program will be seen favourably in Washington. The country’s economic stability is critical to US regional policy, particularly in the context of counterterrorism efforts amid threats from ISIS-K and the Tehrik-i-Taliban Pakistan (TTP). The IMF’s involvement, he noted, helps reduce the risk of an economic collapse that could compound the security challenges in the region.