The International Monetary Fund’s recent approval of a $1.2 billion loan tranche for Pakistan may help the cash-strapped nation avert an immediate default, but it will do little to relieve the financial strain facing average households, according to a new analysis by The News International.

The fresh disbursement—part of the IMF’s ongoing $7 billion bailout programme—provides essential short-term liquidity, enabling Pakistan to keep up with external debt repayments. However, experts warn that this temporary financial cushion does not resolve the country’s deeper macroeconomic challenges, including a widening trade deficit, fiscal imbalance, weak exports, and an impending foreign-exchange crisis.

Trade deficit widens as economic pressures grow

Recent data shows Pakistan’s trade deficit jumped 33% year-on-year in November, reaching $2.86 billion. This sharp rise was driven by declining exports and a surge in imports amid sluggish overall economic activity.

Compounding the situation is the country’s troubled agricultural sector. Heavy rains and devastating floods earlier this year wiped out large swaths of farmland, causing widespread crop losses. Forecasts of even heavier rainfall next summer indicate that the sector—already a backbone of Pakistan’s economy—will continue to face serious disruptions.

Political turmoil derailing economic stability

The report stresses that Pakistan’s economic prospects cannot improve without first addressing intensifying political discord. Years of internal instability have eroded investor confidence, derailed policy continuity, and undermined long-term development planning.

Analysts argue that Pakistan must urgently halt non-essential infrastructure projects, many of which add to public debt without contributing meaningfully to economic productivity. The report calls for a project-by-project audit to assess short- and medium-term benefits before committing additional funds to construction, roads, or other brick-and-mortar initiatives.

Debt should be taken only for essentials, says report

Pakistan’s government, the report notes, should take on new loans only for critical needs—such as strengthening population management programmes, improving climate resilience, and protecting vulnerable communities from extreme weather events.

With a large portion of the population lacking formal education or technical training, Pakistan also remains ill-prepared to accelerate industrialisation—an important pillar for sustainable economic growth.

Tax reforms remain the most urgent need

The report underscores that Pakistan’s weak tax collection system is one of the most significant constraints on economic recovery. Tax authorities frequently fail to meet their collection targets, leaving the federal government chronically short of revenue and forced to rely on external loans.

A meaningful overhaul of tax administration—broadening the tax base, improving compliance, and ending exemptions—is described as essential for stabilising public finances.

Short-term survival, long-term uncertainty

While the IMF loan tranche will temporarily stabilise Pakistan’s immediate financial position, analysts warn that without bold structural reforms, the country remains on a precarious path.

For millions of Pakistanis already grappling with high inflation, unemployment, and household insecurity, the IMF’s latest support may prevent a financial collapse—but it will not ease day-to-day economic hardship.