Committee for the Abolition of Illegitimate Debt

This considerable expenditure on interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payments and debt repayments has resulted in a scenario where the government allocates more funds to servicing its debt than to essential public services, such as education, health, and infrastructure. Furthermore, a notable increase in the defence budget highlights the government’s priorities for military readiness in light of regional tensions.

The combined weight of debt servicing and defence expenditures has significant implications for public services, restricting the government’s capacity to invest in critical sectors such as education, healthcare, and social welfare.

IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org -Dictated Budget
A close examination of the budget for 2025-26 indicates that it is largely a routine budget, primarily focused on IMF-mandated fiscal consolidation and revenue generation. It offers no relief for the working classes and instead prioritises preparations for the forthcoming second review of the IMF program. As with previous budgets, the current budget (2025-26) has been a considerable disappointment for those who believed that the economic stability achievable under the IMF programme would effectively steer the economy and establish a foundation for sustainable growth in the future.

Tax Exemptions for the Rich
According to the Pakistan Economic Survey 2024-25, tax exemptions granted to the business class in this budget have surged to an unprecedented Rs5.84 trillion, representing a 51% increase. These exemptions across various sectors have cost the national exchequer over $21 billion this year, which exceeds the $17 billion required for repayment of commercial and bilateral external debt, as highlighted in the economic survey for 2025.

Upon closer examination, it is evident that these exemptions are protected under three distinct tax laws. Sales tax exemptions have reached Rs 4.3 trillion, which reflects a 50% increase. Income tax exemptions have risen by 68%, while customs duty exemptions have increased by 45% this year. This substantial package of tax exemptions raises significant questions regarding tax expenditures, as the economic survey report asserts that the considerable rise in tax exemption costs is not attributable to any major increase in economic activity.

Austerity for minimum wage earners – prosperity for lawmakers
The government has once again increased the tax burden on the salaried class by approximately Rs 500 billion while maintaining exemptions for the business sector. In a further callous move, it has proposed to increase the salaries and allowances of cabinet members and parliamentarians. Notably, the new budget offers no increase for workers’ wages, which remain stagnant at PKR 37,000.

A mere 10% increase in salaries and a 7% rise in pensions for government employees is hardly sufficient. The situation for small-scale farmers has deteriorated, as the agriculture sector’s share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. has declined. According to the Economic Survey 2025, key crops have experienced a decline of 13.49% due to reduced cultivation areas and adverse weather conditions, significantly impacting cotton, wheat, sugarcane, maize, and rice.

Debt dilemmas & economic sustainability
Pakistan’s tax-to-GDP ratio is below 10%, which is among the lowest in the region. The country consistently struggles to increase tax revenue, further deepening its reliance on borrowing. Additionally, chronic dependence on the IMF, bailouts, and rollovers from friendly countries has contributed to Pakistan’s severe debt addiction. Over recent decades, Pakistan has approached the IMF multiple times. The conditions tied to bailouts—such as austerity measures, tax reforms, and subsidy cuts—often impede growth and fuel public discontent.

Another concerning aspect of the economic policy is the increased domestic borrowing to service debt, which squeezes private sector credit. This situation dampens investment and job creation, ultimately slowing economic growth. Alarmingly, 94.2% of Pakistan’s net revenue is allocated to debt servicing, leaving only a marginal fiscal space of 5.8% for welfare and development. This trend threatens intergenerational equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. and long-term sustainability [1].

GDP growth has stagnated at 2.7% over the past three years. In contrast, even countries like Bangladesh, which has recently experienced significant political turmoil, managed to achieve 4% economic growth. The agriculture sector, accounting for 24% of GDP, has seen its growth rate plummet to just 0.6%, the lowest in nine years. The Economic Survey 2025 reveals a 13.5% decline in major crops. Neoliberal government policies are driving farmers to abandon the cultivation of these crops. Nearly 60% of Pakistan’s population relies on agriculture for their livelihood. This decline is primarily attributed to the withdrawal of the minimum support price (MSP) for wheat, sugarcane, and fertilisers, enforced at the behest of the IMF. Additionally, the large-scale manufacturing sector, which is a key driver of Pakistan’s economic growth, has been in decline for the third consecutive year.

The social landscape presents a far bleaker picture, as over 3 million educated and skilled young Pakistanis have been compelled to leave the country recently in search of better opportunities abroad. This concerning brain drain is a direct consequence of the increasing hopelessness, economic mismanagement, and lack of prospects prevalent within the current socio-economic climate.

The spectre of inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. ’s return looms large
The government claims that inflation in Pakistan has plummeted from 28.3 per cent in January 2024 to 2.4 per cent in January 2025, indicating a dramatic shift from a record high of 38 per cent in May 2023 [2]. However, this assertion is misleading; the key statistical factor influencing this figure is the base effect. We measure inflation by comparing current prices to those from the same month in the previous year, year over year.

The astronomical price hikes over the last two years, driven by global commodity price surges and local mismanagement, are creating an illusion of disinflation. It is important to note that this does not mean prices are decreasing; rather, they are increasing at a slower rate. For example, the notable drop in inflation to 1.5% in February 2025 reflects not only enhanced macroeconomic management but also a statistical anomaly.

The question arises: is this a genuine relief or merely a temporary pause? An examination of the data and evidence suggests it may be a fleeting respite. The IMF’s push for fiscal consolidation and energy reforms has indeed alleviated some inflationary pressures, alongside factors such as fluctuating oil prices and base effects. Nevertheless, analysts caution that this slowdown relies heavily on external loans and a reduction in import costs, rather than reflecting authentic economic growth. For now, Pakistanis may find some comfort, but the looming threat of inflation’s resurgence persists unless substantial, homegrown reforms are implemented. Additionally, the decline in food prices introduces further challenges. Reduced profits may dissuade farmers from cultivating certain crops, which could diminish supply and potentially trigger a resurgence of cost-push inflation in future food prices.

The relentless servicing of loans is fuelling a debt spiral
The indicators outlined above paint a bleak picture of Pakistan’s economy, which is characterised by a debt spiral driven by reckless borrowing from bilateral and multilateral creditors. This cycle of debt persists as mounting repayments have crowded out private investment, weakened the national currency, spurred inflation, and deepened reliance on borrowing—thus perpetuating a vicious fiscal cycle.
According to the Economic Survey 2025, gross external inflows from July to March FY25 amounted to $5.07 billion, primarily sourced from multilaterals ($2.8 billion), commercial sources ($2.01 billion), and bilateral partners ($258 million). In contrast, external outflows surpassed inflows, reaching $5.636 billion, with the majority attributed to repayments to multilateral creditors ($2.828 billion), bilateral partners ($1.565 billion), and commercial lenders ($1.243 billion). This situation adds further strain to foreign exchange reserves.

Pakistan’s external and domestic debt has significantly increased over the past decade and has not decreased since 2008. Currently, interest payments alone account for a substantial portion of government revenue (over 50% recently). This allocation leaves little fiscal space for development, subsidies, or even essential government operations. The issue extends beyond mere debt management or fiscal arrangements—Pakistan has become entrapped in a perfect debt spiral.