According to the International Monetary Fund (IMF), Pakistan is facing complex and multifaceted economic challenges with exceptionally high risks. In a report published on Tuesday, the global lender highlighted that Pakistan’s economy has been severely impacted by various significant shocks in the past year, such as devastating floods causing over $30bn worth of damage, the Ukrainian war, and additional fiscal and external pressures.
The report, which spans 120 pages, stated that in order to address the issues at hand, it is crucial to steadfastly implement the agreed policies and receive ongoing financial support from external partners. The report also emphasized that it is essential to consistently and decisively implement the program agreements in order to minimize risks and maintain macroeconomic stability. The International Monetary Fund (IMF) released this report a week after approving a $3bn bailout program for the South Asian country, which has a population of 220 million people and is ranked as the world’s fifth highest. As part of this program, an immediate disbursement of approximately $1.2bn was provided to assist in stabilizing the country’s economy. This can also lead to higher economic prices in Pakistan, check latest prices here https://pricelive.pk/
The bailout came with strict conditions from the lender, which included implementing a market-determined exchange rate for the Pakistani rupee, raising energy tariffs, and implementing reforms in the energy sector. Additionally, the government assured the IMF that no new tax amnesty scheme or tax exemptions would be introduced in the current fiscal year.
Pakistan’s economic condition deteriorated over the past year due to an escalating balance of payment crisis, diminishing foreign reserves, surging debt, and unprecedented inflation. Prior to the IMF board’s approval of the bailout, Pakistan had only slightly more than $4bn in foreign reserves, which would have sufficed for one month of imports. The financial meltdown has been exacerbated by political unrest as the nation approaches its forthcoming national elections, anticipated to be held this year.
The report mentioned that after the arrangement is completed, there is a possibility of agreeing on a potential successor program with the government. It emphasized that addressing Pakistan’s structural challenges, such as long-term balance of payment pressures, will necessitate ongoing adjustments and support from creditors beyond the program’s duration. The report also highlighted that a potential successor arrangement could play a vital role in ensuring the necessary policy adjustments are made to restore Pakistan’s medium-term sustainability and ability to repay.
Many international telecom companies that were planning to invest in Pakistan has decided for a stay after this news. Many personnels from such companies has decided to put this decision postpon and later after economic stability to invest in Pakistani market.
Post Policy Missteps
According to Yousuf M Farooq, an economic analyst from Karachi, the IMF recommendations may be the perfect remedy for Pakistan’s struggling economy. By adhering to the IMF’s suggestions, we could potentially overcome our current difficulties. Farooq emphasized the importance of implementing a flexible foreign exchange rate, eliminating import restrictions, and adopting other recommended policies during an interview with Al Jazeera.
Farooq emphasized that the IMF report highlights the government’s policy missteps and emphasizes the need for responsible fiscal behavior from the country’s financial managers. Nevertheless, Farooq acknowledged that a new IMF program is unavoidable for Pakistan. He further stated that successfully completing this arrangement would provide some relief for the next nine months, enabling the upcoming elected government to negotiate a new IMF program.
According to economist Hina Shaikh, the IMF has forecasted that it will take a significant amount of time for Pakistan’s economy to return to a path of growth. The economist based in Lahore stated that the immediate release of IMF funds will assist in stabilizing the economy temporarily, but cautioned that the recovery may not be long-lasting. Shaikh emphasized that the recent IMF report echoes the sentiments expressed by numerous macroeconomists, highlighting the necessity for structural reforms to rectify the major imbalances in the economy. She further stated that successive governments must implement responsible policies in order to address these reforms.