Pakistan’s economy is in a considerably better position than it was a few years ago. The country has moved away from acute external pressure and macroeconomic instability, and Prime Minister Shehbaz Sharif and his economic team deserve recognition for maintaining fiscal discipline, rebuilding reserves and keeping the economy on a path of stabilization. On September 25, SBP reserves stood at $21.44 billion and total liquid reserves at $26.77 billion. Provisional GDP growth for FY2025-26 was 3.70 percent, while the fiscal position improved significantly. (SBP; Pakistan Economic Survey 2025-26; Finance Division). This progress matters. But stability is not the destination. It provides the breathing space to address the structural weaknesses that have repeatedly pushed Pakistan back into external and fiscal crises. The next phase must turn stability into investment, productivity, exports, jobs and lasting growth.

Stabilization Is Not Transformation

The ongoing IMF review illustrates both the progress made and the challenges that remain. The review covers the fourth review of the $7 billion Extended Fund Facility and the third review of the Resilience and Sustainability Facility, alongside the Article IV consultation. The programme continues to emphasize stronger public finances, competitiveness, productivity, state-owned enterprise reform, social protection and a viable energy sector. (IMF; Finance Division)

The importance of the review, however, goes beyond the next disbursement. Pakistan has already demonstrated that it can restore macroeconomic discipline under pressure. The harder task now is to ensure that this discipline produces a more productive economy rather than another cycle of stabilization followed by renewed external pressure.

Energy Reform Must Reduce Business Costs

The power sector remains one of the most stubborn structural problems. Circular debt reached Rs.1.675 trillion at the end of June 2026, exceeding the programme target. The government has budgeted Rs.830 billion for power subsidies in FY2026-27, while the IMF is seeking a shift from broad electricity cross-subsidies towards more targeted support for vulnerable households.

The proposed shift would target support more directly at households that need it. But energy reform must be judged by more than the size of circular debt. Its ultimate test is whether factories and businesses can obtain reliable electricity at competitive and predictable prices. That requires sustained reductions in theft and technical losses, better performance by distribution companies, stronger transmission, a more efficient generation mix and disciplined subsidies. Capacity-related costs also need continued review within the overall power-sector reform framework. Avoidable taxes and charges that unnecessarily raise industrial electricity costs should be examined. For productive sectors, the objective should be simple: lower and more predictable energy costs. Cheaper and reliable electricity can........

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