With foreign exchange reserves dropping to $3.08 billion, Pakistan has no other option but to accept the International Monetary Fund’s (IMF) stringent riders for resumption of the loan package under the Extended Fund Facility (EEF). Worries for Pakistan Prime Shehbaz Sharif will rise with general elections approaching. The IMF riders will further push inflation and dent the pockets of the common people.
Problems will surge for the common Pakistanis, who are already reeling under inflationary pressures with acute shortage of essential items.
An analyst told India Narrative that faced with unparalleled economic stress, Islamabad could try to increase the size of the loan programme. However, he said that the loan programme may not put the economy back in order.
The South Asian nation has already taken 22 loan packages in the last 70 years, “yet achieved no lasting solution,” the Pakistan Institute of Development Economics (PIDE) earlier said.
Until structural reform measures are put in place, the Pakistan economy will continue to suffer from such “ailments” from time to time.
Meanwhile the IMF team which rejected the Sharif government’s plan to manage the circular debt, has asked the cash starved Pakistan to end the unbudgeted power subsidies amounting to (Pakistani) Rs 675 billion. It has prescribed increasing electricity tariff along with putting in place revenue generating measures amid constricted fiscal room.
Sharif termed the bailout riders set by the multilateral agency as “unimaginable.”
“I will not go into the details but will only say that our economic challenge is unimaginable. The conditions we will have to agree to with the IMF are beyond imagination. But we will have to agree with the conditions,” Sharif said in a televised address.
The IMF bailout package kicked in2019 but after the previous Imran Khan government went back on the commitments, the programme was stalled. Miftah Ismail who was Sharif’s first finance minister before Ishaq Dar took charge was instrumental in reviving the IMF loan. Ismail has started eliminating fuel subsidies by increasing prices. However, he was unceremoniously removed. Dar on the other hand reversed Ismail’s policies by cutting down on the fuel prices which led to the IMF once again stalling the loan programme.
The devastating floods last year added to the problems. A UNICEF report noted that until last month, as many as 4 million children were living near contaminated and stagnant flood waters, risking their survival and wellbeing. “Frail, hungry, children are fighting a losing battle against severe acute malnutrition, diarrhoea, malaria, dengue fever, typhoid, acute respiratory infections, and painful skin conditions,” it said, adding that thousands of homes and many public health facilities, water systems and schools have been destroyed or damaged.
“Given the situation that Pakistan is going through, a further rise in inflation will deal a blow to the people of the country,” the analyst noted.
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