Why IMF needs to bail out Pakistan…again

TNN / Aug 29, 2022, 08:45 IST

Text Size

The criticality: The executive board of the International Monetary Fund (IMF) will meet today to decide on whether to give Pakistan its much needed $1.2 billion in loans or not, as the country totters on the brink of an economic collapse. The loan is much needed for a country whose currency lost over 33% in value against the US dollar this year, touching a new low of Pakistani Rupees (PKR) 232.93 against the dollar last month along with 25% inflation.

Empty coffers? Pakistan, which has banned imports of more than 36 “non-essential” and “luxury items” — which includes canned fish, jams and jellies, with Pakistan’s minister of planning and development Ahsan Iqbal infamously calling on people to drink less tea — has about $8 billion in forex reserves, just enough to cover a few weeks worth of imports. For the record, in 2021-22, Pakistanis drank $400 million worth of tea — the country being the world’s biggest tea importer.

The need: Pakistan, over 80% of whose GDP comprises foreign debt, is also equally desperate for the release of the IMF loan as the release of nearly $12 billion in loans from countries like China, Saudi Arabia, Qatar and the UAE is dependent on the IMF’s decision today. Among the world’s most bailed-out countries, this will be Pakistan’s 23rd loan from the IMF — assuming it comes through — since 1950, the year the country joined the multinational lending institution.

Best interests: For both the US — the IMF’s biggest donor — and China, Pakistan’s economic failure represents a dreadful scenario, one both nations had rather avoid. While Washington would certainly not want a failed nuclear-armed nation on the border of Afghanistan — where the Taliban administration is known to be inimical to US interests — for Beijing, an economic collapse of Islamabad will throw into peril its $60 billion China-Pakistan Economic Corridor (CPEC), part of China’s global infrastructure project, the Belt and Road Initiative (BRI).

Troubles compounded: Pakistan is also facing a destructive monsoon, which has claimed 1,033 lives since June — 119 of whom died in the last 24 hours, according to the country’s National Disaster Management Authority — prompting PM Shehbaz Sharif to seek international help as over 3.3 crore people have been displaced due to the flooding caused by the rains, with Balochistan and Sindh the worst affected regions in the country.

FacebookTwitterInstagramKOO APPYOUTUBE

Start a Conversation

end of article