Pakistan is in a bind.
Cash starved Pakistan’s struggle to secure the much-needed bailout package from the International Monetary Fund (IMF) is set to continue for sometime as the multilateral agency has toughened its stand this time. The IMF has put across a new condition asking Islamabad to secure loan assurances from its friendly countries. But Pakistan’s allies in turn have indicated that they will honour the Shehbaz Sharif government’s request for financial assistance only after the multilateral agency opens its coffers. Pakistan Prime Minister Shehbaz Sharif, who has little time to turn the economy from collapsing, has blamed the political class for doing nothing in the last 75 years.
“What have we done since our independence in the last 75 years when we are economically enslaved by the IMF?" he asked while addressing the media after his tour to the flood hit areas.
Sharif and team were expecting to get the funds by June end. However, now it may have to wait till the month end to get a portion of the total package of $6 billion. Though Islamabad has raised taxes and removed fuel subsidies despite the existing inflationary pressures, the IMF is yet to act favourably.
The IMF has said that an amount of $1.2 billion will be given by the end of this month provided its has ‘adequate assurances’ from friendly countries for more loans to bridge financing gap, the Express Tribune said.
In 2019, Islamabad signed a $6 billion loan programme with the IMF under its Extended Fund Facility. But the programme was halted in January 2020 after disbursement of about $3 billion after Imran Khan refused to increase electricity tariff and impose additional taxes as prescribed by the multilateral agency.
“Though I expect the IMF to finally give the loan, there are bottlenecks and Islamabad will have to address those,” Abhijnan Rej, researcher and consultant focusing on Asian security and geopolitics, told India Narrative.
Rej added that funding from Beijing towards the $60 billion China Pakistan Economic Corridor Pakistan (CPEC) is also thinning, adding to Islamabad’s headache.
The repeated and cyclical nature of Pakistan’s demand for doles has set the alarm bell ringing this time among its friendly allies as well as the IMF as the world battles unprecedented economic challenges and uncertainties.
The country, which has been in a near-bankruptcy several times before, has typically enjoyed easy access to loans to bilateral as well as multilateral lenders.
Pakistan’s local newspaper Dawn said that the Arab monarchies were now interested in pursuing radical transformation of their economy, society, and foreign policy. “The monarchies now cared about return on investment from their allies, which included Pakistan. Unfortunately for them, both the economic and geopolitical returns in the recent past were in the red,” it said.
Pakistan’s foreign exchange reserves, as on July 22, stood at $ 8,575.16 million. This has led to serious concerns for the country's policymakers.
In January, it was $16,607 million.