Despite settlements on all the issues between the government with the International Monetary Fund (IMF), a documented shape of the agreement has not emerged yet, whereas, the coalition government continued blaming the previous Pakistan Tehreek-e-Insaf (PTI) government for leaving no option other than accepting the tough conditions of the global financial institution.
Declaring implementation of IMF conditions mandatory, the coalition has increased the prices of petrol, electricity and other commodities to a record highest. Moreover, the US dollar has reached the highest level in the history of the country while foreign exchange reserves are also under severe pressure.
Economists said that an agreement with the International Monetary Fund is not only necessary to acquire a loan but other international institutions and countries are also subject to a loan or concession from the IMF.
The government has repeatedly said that there is no way out except the agreement with the IMF and diverted the financial pressure toward nationals. Following the coalition government’s decisions, not only electricity, and petroleum products prices are increased but the budget for FY2022-23 was also finalised by keeping in view of conditions set by the IMF. The people are facing skyrocketing inflation and their financial troubles are getting worse.
Finance Minister Miftah Ismail, Minister of State for Finance Dr Ayesha Ghous Pasha and other government officials have been claiming that matters have been settled with the International Monetary Fund (IMF) under which Pakistan will receive $1 billion out of $6 billion loans under the IMF bailout program. Pakistan has already got $3 billion under the same program.
Pakistan has requested the IMF to increase the loan program from $6 billion to $8 billion and also asked the IMF to extend the loan period by one year. Pakistan wants the program to continue till 2024 instead of 2023, it was learnt.
Pakistan’s current account deficit also reached $13.2 billion, whereas, whereas, the country will require $30 billion in the current fiscal year for the payment of the loans and interest. On the other hand, in case of failure of negotiations with the IMF, Pakistan will face difficulties to get financial assistance or loans from other countries including China and many other financial institutions.
The appreciation of the dollar and the depreciating value of the rupee is a matter of concern for the country’s economy, which has been driving up inflation and affecting external payments. From April 11 to June 21, the dollar rose up to Rs28 which increased Pakistan’s foreign debt by Rs3,600 billion.
According to economists, the main reason for the recent rise in the value of the dollar is the delay in the loan agreement with the IMF that has blocked foreign funding for Pakistan, whereas, the decline in foreign exchange reserves is due to an increase in imports and decrease in exports. Pakistan relies on tax aid instead of producing different products locally.
Pakistan is facing problems such as depletion of foreign exchange reserves as the outflow of dollars abroad in terms of imports is much higher than the number of dollars coming in through exports and remittances.
Despite the new government formed in Pakistan in April, it apparently failed to restore the IMF loan program.
Pakistan has received $2.3 billion from China and is expected to receive more loans. Pakistan is also expected to get $2 billion loan from Asian Development Bank and $400 million from the World Bank after finalising the agreement with the IMF.
Despite the government’s claims, the question is still here whether the country has signed the agreement with IMF or not that is causing economic uncertainty.
No country can just run on debt, the government will have to make economic reforms besides eliminating the fiscal deficit to improve the economic situation.