Pakistan accepts IMF loan conditions, but would it be able to honour them?

INTERNATIONAL DESK: The coming financial year may not bring hope for Pakistan as most economic sectors are on the decline. The country’s imports are hit because of extremely low forex reserves. Pakistan has also agreed to meet all conditions of the International Monetary Fund (IMF) despite having a history of not keeping its promises, reported Islam Khabar.

The ruling Pakistan Democratic Movement (PDM) coalition government led by Shehbaz Sharif has agreed to meet all conditions to receive an instalment of USD 1.2 billion. Although the report claimed that in recent negotiations between Pakistan and IMF via video conferencing on January 24 this year, IMF pointed out that it was not willing to make any concessions for releasing the loan to Pakistan.

The conditions put up by IMF include eliminating electricity subsidies, adjusting gas tariffs to align with international prices, implementing a market-determined exchange rate, and lifting restrictions on opening letters of credit. If the agreement between Pakistan and IMF is reached then Pakistan would receive the desperate economic help it needs.

And if the PDM government fails to meet any of the IMF’s conditions then the possible fund inflows from allies like Saudi Arabia, UAE, China, and other institutional lenders will also be revoked. And Pakistan has a history of not fulfilling IMF conditions, the Islam Khabar report said.

However, a loan from Saudi Arabia and China is yet to materialize. Although any more monetary help from the world will only increase Pakistan’s existing loan of USD 130 billion. That too when the country has the total Gross Domestic Product of USD 376 billion. The report from Islam Khabar also claimed that Pakistan is planning to borrow another USD 10 billion from China for the upgradation of its national railway.

Islam Khabar quoted reports from Pakistan’s media and reported that 9,000 containers are stuck at different Pakistani seaports which disrupt the supply of essential goods. The inflation has gone up to almost 30 per cent. The importers are unable to clear containers due to a shortage of dollars, while shipping companies are threatening to suspend Pakistan’s operations over the country’s failure to make timely payments and the current forex reserve of the country is just USD 4.4 billion with the State Bank of Pakistan (SBP). This is just enough for three weeks. Furthermore, there are pending requests for opening more letters of credit is in the range of USD 1.5 billion to USD 2 billion. And the government has also stopped USD 2 billion in payments of dividends which is hindering investment in the country.

Adding more to Pakistan’s problem is the textile industry on the brink of closure losing credibility and market share among international buyers. The crisis in the country has been there for over three years and the suspension of IMF’s bailout package in 2020, losses from floods in June 2022, and political mismanagement led to the crisis in 2022.

Further in the report according to the SBP data, as of April 8 last year when former Prime minister Imran Khan’s Pakistan Tehreek-i-Insaf (PTI) tenure ended, the SBP had USD 10.9 billion in foreign exchange reserves. However, between April-August, the reserves decreased by 29 per cent, or USD 3.1 billion, to USD 7.8 billion.

The finance minister Ishaq Dar wasted crucial four months believing that Pakistan would receive ‘unconditional’ loans from Saudi Arabia, China, and the UAE as well as by selling assets. However, this expectation did not come to fruition, and the country’s reserves declined. And now the government has realised that there is no option available to them. (ANI)