Pakistan since its creation has been facing severe economic crisis off and on. And as a member of the International Monetary Fund (IMF), Pakistan has a long history of receiving loans from it. Since 1950, Pakistan has received 22 loans from the IMF for different events.
The most recent loan that the IMF granted to Pakistan was back in 2019, as an instalment of a mutually agreed bailout package worth $6 billion. But soon after one year, this agreement was revoked by the IMF, and the stated reason for this move was Pakistan’s failure to carry out recommendations for structural reform.
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Again in 2022, Pakistan and the IMF concluded a deal on a new loan programme, and the IMF provided $1.1 billion in funds to Pakistan. The IMF's assistance has always been crucial for Pakistan, as it has played a key role in stabilizing Pakistan’s drowning economy. The ultimate objective of providing loans to Pakistan was to support Pakistan’s economic reforms and reduce the country’s fiscal deficit.
2023 marks one of the worst economic years in the history of Pakistan. Balance of payment crisis, excess spending on trade, high inflation rate, devastating floods, and continuous devaluation of the currency: all of this, taken together, has led to a considerable drop in foreign exchange reserves, making the situation vulnerable to such an extent that the government seems helpless to manage the country’s economy.
To tackle this alarming situation, Pakistan again looks towards the IMF for its financial support, but this time there is extreme tension between Pakistan and the IMF as both of them are not able to agree upon the same terms and conditions for the grant of a loan. Pakistani officials and the IMF delegation are still negotiating so that they can conclude a deal on loans to bail out the financial crisis of the country and avoid a default.
A serious trust deficit is believed to be the reason that the IMF has put forward new conditions for Pakistan to receive financial aid, while these new conditions are likely to make it difficult for Pakistan to receive a loan.
The IMF has insisted that Pakistan protect the poor and impose more taxes on the elite class to secure the financial aid. Accepting these conditions from the IMF is not favorable for the present Prime Minister of Pakistan, Mr. Shehbaz Sharif, right now due to many reasons, the most prominent of which is political instability. It is believed that the American lender, the IMF, is trying to overtake and control the economy of Pakistan by granting aid to Pakistan. And hence, Pakistan should not accept the terms and conditions narrated by the IMF.
In conclusion, Pakistan’s current economic situation is an extremely complex and challenging issue. Moreover, according to the World Bank report, the economy of Pakistan will grow by 2% only in the current fiscal year. To tackle this alarming situation, the government needs to take some bold decisions. As far as the IMF's loan is concerned, both the IMF and Pakistan need to show some leniency to reach a final deal.