Pakistan’s bailout deal with IMF in Doldrums

The IMF approved a loan of USD 7 billion on September 25, 2024, aimed at stabilizing Pakistan’s struggling economy.

This marked the 25th time Pakistan had sought assistance from the IMF, with Prime Minister Shehbaz Sharif expressing optimism about the deal’s potential to alleviate economic distress caused by various crises, including inflation and dwindling foreign reserves.

Pakistan is grappling with severe economic challenges, including an external debt exceeding USD 130 billion and inflation rates that peaked at 38% earlier this year.

The country must repay approximately USD 90 billion over the next three years, with significant payments due soon.

The IMF’s conditions for the bailout include sweeping tax reforms and a balance in spending between federal and provincial governments, which many experts consider harsh and potentially unfeasible given Pakistan’s current economic state.

Concerns are growing regarding Pakistan’s USD 7 billion bailout deal with the International Monetary Fund (IMF), which has faced significant delays and complications shortly after its approval.

Despite the initial approval, reports indicate that the agreement is now in jeopardy. Officials have cited a lack of progress in meeting critical conditions set by the IMF, particularly regarding fiscal discipline and securing additional financing from bilateral partners like China and Saudi Arabia.

The deputy prime minister has accused the IMF of stalling, raising questions about Pakistan’s compliance with the terms necessary for disbursement.

The political landscape in Pakistan adds another layer of complexity. The ruling coalition may benefit from stabilizing the economy through this bailout; however, ongoing political unrest and previous breaches of IMF agreements have created scepticism about future compliance.

Experts warn that without securing this deal, Pakistan risks facing dire economic consequences, including potential default.

ÀWhile some analysts believe there is still time to negotiate terms before upcoming debt repayments in November, others highlight that continued IMF support or debt restructuring will be essential for long-term stability.

The USD 7 billion bailout was initially seen as a lifeline for Pakistan’s economy, recent developments suggest that significant aà remain before it can effectively contribute to stabilizing the nation’s financial situation.