This is patchwork economics

The IMF has unveiled yet another set of conditions under the Extended Fund Facility: asset declarations, corruption action plans, sector studies, sugar-market liberalisation, bond-market diagnostics, new taxes and procedural benchmarks. On paper, it looks like a busy reform agenda. In reality, it appears to be patchwork, lacking both coherence and serious intent to reform.

Many of these measures create the appearance of reforms following the Governance & Corruption Diagnostic Assessment (GCDA), while carefully avoiding the central problem that has kept Pakistan trapped in recurring crises for decades: a political economy that insulates decision-makers from failure and rewards preservation of the status quo.

Once again, the IMF skirts the core structural failures that actually determine outcomes: the absence of merit in key appointments, weak and politically captured institutions, incentive systems that reward obedience rather than competence, and elite dominance over regulators and economic decision-making. Instead of confronting these issues head-on, the programme relies on technical checklists and procedural milestones – tools that are easier to negotiate, monitor and reverse.

Without fixing who runs institutions, how they are chosen and what consequences they face for failure, Pakistan will continue to produce shallow governance, weak implementation, and predictable policy reversals. No number of roadmaps, action plans or diagnostic studies can substitute for merit-based leadership and institutional credibility.

In fact, some of these conditions risk making matters worse. Higher and more regressive taxes extract additional revenue from already overtaxed segments of society while leaving elite rents untouched. Cost pressures on agriculture and industry erode competitiveness without addressing structural inefficiencies. Fragmented ‘action plans’ multiply paperwork but do not alter behaviour.

This is not reform. It is cosmetic conditionality — technical language used to avoid politically painful change.

Pakistan does not suffer from a shortage of good proposals. It suffers from a system in which decision-makers face little downside for adverse outcomes and often privately benefit from failure. Until reforms create real risks for non-performance and real rewards for delivering results, IMF programmes will continue to stabilise crises temporarily without changing trajectories.

Nowhere is this failure more visible than in the power sector.

Pakistan’s power crisis is not a mystery. It is the inevitable outcome of managing deep structural failures with accounting tricks. The IMF has capped power subsidies at Rs893 billion and imposed a Rs400 billion ceiling on new circular debt. Yet, almost simultaneously, the Economic Coordination Committee approved a Rs522 billion circular-debt flow — effectively conceding that inefficiencies, losses and non-recoveries will continue and be absorbed through the budget.

This is at best fiscal cosmetics rather than reform. Allowing circular debt to grow and then ‘neutralising’ it with taxpayer money guarantees one outcome: nothing improves. Loss-making distribution companies remain untouched, recoveries stay weak, line losses persist and consumers keep paying higher tariffs, including Rs3.23 per unit merely to service past failures. The system protects those who run it while shifting the burden onto citizens and productive firms.

The problem is not a lack of knowledge. The solutions are well known: lowering generation costs through fuel-mix optimisation and competitive procurement; enforcing non-negotiable benchmarks to reduce line losses and recovery losses; and ensuring that failure carries consequences. Beyond this, real reform requires smart privatisation to introduce competition and accountability, and a strong, independent, technically credible Nepra that regulates effectively, enforces discipline and protects consumers rather than accommodating inefficiency.

But these steps threaten entrenched interests. And therein lies the real constraint.

Pakistan’s political economy has evolved to protect those at the helm from the consequences of bad decisions. Boards can underperform without removal. Regulators can fail without accountability. Policymakers can reverse decisions without cost. Losses are socialised, while rents remain private. As long as this structure remains intact, no external conditionality — IMF or otherwise — can deliver durable reform.

This is why repeated IMF programmes have failed to change outcomes. They assume that once the right technical steps are identified, implementation will follow. That assumption ignores a basic political reality: people do not implement reforms that harm their own interests unless they are compelled to do so.

For reform to occur, the political economy must be corrected in a way that creates both risk and reward for decision-makers — risk for failure, reward for delivery. Without this, even good policies will remain superficial in implementation and reversible.

Risk means that poor performance must carry tangible consequences: removal from office, loss of authority, reputational damage and legal exposure. It means institutions cannot be staffed on loyalty or obedience, but on integrity and competence — and that incompetence and corruption carry a cost. It means regulators cannot be captured without consequence, and fiscal indiscipline cannot be indefinitely deferred through accounting adjustments.

Reward means that those who deliver outcomes — lower losses, higher recoveries, better service, export growth, fiscal discipline — gain institutional security, professional credibility and political capital. Reform cannot rely on personal sacrifice alone; it must be aligned with tangible incentives.

None of this happens through superficial checklists. It happens through structural changes in power and accountability. This is where IMF programmes consistently fall short. The Fund is comfortable with prescribing taxes, price adjustments and reporting requirements. It is far less comfortable confronting appointment processes, governance structures and elite capture – even though these are precisely the levers that determine success or failure.

As a result, Pakistan remains trapped in a destructive equilibrium: crisis triggers an IMF programme; the programme focuses on revenue extraction and short-term stabilisation; political-economy constraints remain untouched; growth falters; governance weakens; and the next crisis inevitably follows.

Breaking this cycle requires a different approach — one that starts not with procedures, but with who holds power and how they areheld accountable.

Atif Mian’s ‘5/50’ vision rightly argues that Pakistan needs a long-term growth trajectory rather than endless firefighting. But even that vision cannot materialise unless the political economy is fundamentally reset. Growth over decades requires institutions that outlast governments, policies that survive political cycles and leaders whose incentives are aligned with national outcomes rather than personal insulation.

That alignment will not emerge from goodwill. It must be consciously designed.

It requires depoliticised, merit-based appointments to key economic institutions. It requires autonomy backed by accountability — not autonomy without consequences. It requires regulators that cannot be overridden by informal pressure. It requires fiscal rules that constrain discretion rather than legitimise evasion. And it requires external programmes willing to condition support not just on what is done, but on who does it and how they are held responsible.

Truth-telling in such a system is costly. Those who speak honestly are often marginalised, while those who display obedience are rewarded. But avoiding the truth has proven far more costly for the country.

Pakistan does not need another list of conditions. It needs a correction of its political economy — one that makes reform unavoidable for decision-makers because failure is no longer safe and success is finally rewarded.

Until that happens, every IMF programme will remain patchwork on a collapsing structure — and patchwork economics will continue to deliver gains for a few and permanent pain for the overwhelming majority in the land of the pure.

Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.

X/Twitter: @Asad_AshahThe writer is a former managing partner of a leading professional services firm and has done extensive work on governance in the public and private sectors.

Originally published in The News