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As Pakistan enters the new fiscal year, the government has taken a significant and controversial step by approving one of the International Monetary Fund (IMF) primary conditions: the closure of 1,000 utility stores across the country. The move, announced on July 1, 2025, marks the beginning of a broader restructuring plan aimed at reducing fiscal deficits, improving institutional efficiency, and fulfilling commitments made under the Extended Fund Facility (EFF) agreement with the IMF.
This decision, while economically strategic in the eyes of policymakers, has sparked concern among labor unions, social activists, and citizens reliant on subsidized goods.
The Utility Stores Corporation (USC) has long been a key player in the provision of subsidized food and daily-use items to Pakistan’s low- and middle-income populations. With more than 5,500 outlets nationwide, it serves as one of the few public sector institutions offering relief against inflation.
However, years of operational inefficiencies, corruption, and increasing dependency on government subsidies—estimated at Rs. 38 billion in the last fiscal year and projected to be Rs. 60 billion in the current budget—have turned the USC into a fiscal liability. The IMF, as part of its structural reform agenda, urged Pakistan to downsize or privatize loss-making state-owned enterprises (SOEs), including the USC.
The government’s initial implementation phase involves closing 1,000 non-performing or low-revenue utility stores. Alongside the closures, over 2,200 daily-wage employees have already been laid off. A second wave of workforce reduction is expected to affect around 2,800 contractual employees. Meanwhile, officers in Grade 14 and above are to be shifted into a “surplus pool,” pending reassignment or further restructuring.
By the end of this process, the total number of utility stores in operation will drop from 5,500 to approximately 1,500—representing a nearly 75% reduction in the USC’s retail footprint.
This action aligns closely with IMF recommendations that Pakistan minimize budgetary leakages and reduce the fiscal burden of inefficient state-owned bodies. With the economy still struggling under inflationary pressures, debt servicing obligations, and a weak rupee, the government views IMF backing as vital for macroeconomic stability.
Critics argue that Pakistan has entered a cycle of dependency on IMF programs, repeatedly borrowing in exchange for tough reforms that disproportionately affect the working class. While closing utility stores may ease the fiscal burden in the short term, the human and social cost could be substantial.
The most immediate and visible impact of this policy is on employment. Thousands of families dependent on daily or contractual work with the USC now face financial insecurity, with limited social safety nets available. Many of these workers come from economically vulnerable backgrounds and are unlikely to find equivalent opportunities in the private sector soon.
Secondly, the removal of subsidized utility stores from rural and peri-urban areas—where access to affordable goods is already limited—may lead to price hikes, hoarding, and increased reliance on unregulated markets. This undermines the government’s own inflation-control efforts, especially as food prices remain volatile.
Opposition parties and labor unions have criticized the decision as anti-poor and ill-timed. Some have demanded the government release a compensation and resettlement plan for affected workers and ensure that essential commodities remain accessible to the poor. Protests have already emerged in cities like Karachi, Lahore, and Peshawar, calling for the reversal of the closures.
In contrast, the government defends the decision as necessary, framing it as part of a broader “economic correction” agenda aimed at stabilizing the economy and attracting foreign investment. Officials insist that the closures target only loss-making outlets and that future plans may include digital transformation, public-private partnerships, and better-targeted subsidies.
Whether this move will ultimately be seen as reformative or regressive depends on what comes next. If the government follows through with transparent restructuring, introduces targeted social support programs, and reforms the remaining utility stores for greater efficiency, it may find some success in reshaping public sector operations.
However, without adequate transition plans, the burden of these IMF-backed reforms may fall unevenly on the poor—exacerbating inequality and eroding trust in state institutions. Economic reform, after all, is not just about numbers but about people.
Conclusion
The closure of 1,000 utility stores at the start of Pakistan’s fiscal year marks a turning point in the country’s relationship with the IMF and its approach to managing public enterprises. While it may bring short-term fiscal relief, it also brings new social challenges. As always, the real test will be in how well the government balances economic mandates with human realities in the months ahead.
Reference: نئےمالی سال کےپہلےدن آئی ایم ایف کی پہلی شرط منظور، یوٹیلیٹی اسٹورز بند
