Stabilisation sans reform

Pakistan has secured yet another lifeline. On Monday, the IMF's Executive Board approved a $1.3 billion disbursement after granting waivers for several missed targets and extracting fresh commitments from Islamabad to plug a widening revenue gap. The decision keeps the country's $8.4 billion Extended Fund Facility and Resilience and Sustainability Facility programmes on track.

What's surprising is that Pakistan yet again stumbled on key conditions, but ultimately walked away with a new tranche. However, beneath this recurring choreography is the fact that while stabilisation has begun, structural reform remains elusive. To secure Monday's board date, the government had to deliver two politically uncomfortable prior actions: restructuring an undercapitalised bank and publishing the long-delayed Governance and Corruption Diagnostic Assessment report. The latter came at a political cost, exposing systemic weaknesses that even parliament members described as an indictment of the state's governance machinery.

In the end, the IMF granted Pakistan a pass, in turn relaxing future deadlines and adjusting targets that were blown off course by floods and administrative inertia. Still, the Fund acknowledged progress where it was due. The central bank overperformed on its reserve accumulation target, purchasing $8.4 billion from the local market, even as other indicators faltered. Yet, Pakistan missed its tax collection target by a staggering Rs413 billion in the first five months of the fiscal year. The government, according to reports, is now preparing a mini-budget in January, even as the FBR maintains that contingency measures may not be needed.

Pakistan has bought time, and the bleeding might have slowed. But no country can reform on borrowed waivers. If Pakistan wants to break free from the Fund-to-Fund cycle, it must prioritise real reform by working towards broadening the tax base and fixing loss-making SOEs, to start with.