The International Monetary Fund has acknowledged that Pakistan’s policy efforts under the ongoing program have “helped stabilize the economy and rebuild confidence.” The statement comes at a time when foreign reserves have considerably improved, the currency exchange rate is relatively stable, and immediate external financing pressures are at ease.

On paper, the economic outlook remains stable, but new poverty estimates show that nearly 70 million Pakistanis are living below the poverty line of Rs 8,484, an amount that hardly covers basic human needs. Therefore, the contrast between stabilization and deepening economic hardships for a large population raises a question for the policymakers: Stability for whom and inclusivity on what terms?

During 2023, stabilization was unavoidable with depleting reserves, current account deficits, external debt pressures, and currency devaluation. To avoid a sovereign default, an IMF program was necessary, and for the IMF program, monetary tightening, fiscal consolidation, and control of currency fluctuation were also required. These measures were essential to restore the trust of local and foreign investors and to portray the seriousness of the government towards uplifting the decaying economy.

In that sense, they have achieved their objectives in stabilizing the economy by controlling inflation, lowering interest rates, slightly improving investor confidence, and keeping the currency stable. But stabilization is not prosperity.

The tools that were used to restore macroeconomic equilibrium impose a short-term cost on the consumers. Energy prices were adjusted, raising household utility bills; indirect taxation was used to expand revenue, pushing the burden onto ordinary consumers, and higher interest rates in the beginning phase led to a decline in private investment. Therefore, real income, which was already low, has been unable to recover........

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