Finally, Pakistan has something to cheer about as it managed to clinch the much-needed bailout package of $3 billion supported by a Stand By Arrangement (SBA) from the International Monetary Fund (IMF) just hours before the expiry of the current programme.
The IMF board is now expected to approve the package by mid-July which will help Pakistan avert a sovereign default.
Pakistan is the fifth largest borrower of the multilateral agency with an outstanding debt of $7.4 billion. It has so far sought IMF assistance 23 times.
The IMF in its statement issued said that the new SBA will support the authorities’ immediate efforts to stabilize the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners.
However, the IMF loan will only serve as a breather for the South Asian nation, which has to make a repayment of $73 billion by 2025. An amount of $3.7 billion will have to be serviced in the next few days.
“The IMF package will come handy to avert a default but the country has to put its house in order if it wants its economy to proposer. Only then can the country come out of the shackle of repeated IMF loans,” an analyst told India Narrative.
Earlier global rating agency Moody’s had warned that Pakistan would default without the IMF loan. The country’s foreign exchange reserves held by its central bank on June 16 was barely $3.5 billion, not even enough to cover a month’s imports.
With the surge in debt levels, Pakistan, which goes to polls later this year, would need to play its cards well.
While the IMF loan has come just in time for the country to avert a default, the country’s policymakers need to take this opportunity, learn from past mistakes and take prudent steps to resurrect the sagging economy and other social parameters.