Balancing Fiscal Stability and Social Welfare: The IMF's Influence on Pakistan's PTI and PDM Governments

Abstract

This research seeks to critically examine the impact of IMF programs on Pakistan’s internal policies for socio-economic change during the PTI and PDM regimes. This paper analyzes the characteristics of IMF conditionalities, their fiscal, monetary, and social implications and effects on stabilization objectives, as well as the social repercussions and outcomes in both countries. This paper uses dependency theory and austerity theory to analyze the historical IMF revolving door with Pakistan and the effect of this on sovereign economic freedom and welfare. This paper shows that although IMF programs have helped Pakistan in achieving some of its near-term fiscal objectives, they have led to the decline of other economic indicators, including the rate of inflation, social expenditure, and poverty, especially among the poor and vulnerable. After that, the paper outlines several recommendations for practice and policy concerning principles that future IMFs should follow to achieve the right proportion between budget constraints and socio-economic expenditure/development. This paper adds to the existing literature on external interference in the financial systems of developing countries and calls for changes that will complement national development objectives.