Pakistan at beginning of worst economic crisis since country’s formation: Report

According to Geo-politik, Pakistan has taken fourteen loans from the IMF thus far, but ironically none of them has ever been completed. This, therefore, raises serious questions about the capacity and capability of the Pakistan state to get out of this dead-end.

Pakistan may face a disaster like never before unless China or Saudi Arabia bail out the country. The Pakistani rupee has plummeted to PKR 250 against the dollar, and the currency had to forego 12 per cent of its value. The country’s government has raised the price of petrol and diesel by Pak Rs 35 per litre.

Pakistan Prime Minister Shehbaz Sharif on January 24 said that the ruling PDM alliance was ready to sacrifice its “political career for the sake of the country” and accept the International Monetary Fund’s (IMF) “stringent” conditions to revive the loan programme.

According to Geo-Politik, IMF officials have held their latest negotiations via video link with Pakistan, and reports indicate that they have not shown any willingness to relax the conditions and will not release the next tranche unless the Pakistan government keeps its promises.

Pakistan upon accepting the conditions will receive USD 1.2 billion from the IMF, with possible additional funding from Saudi Arabia, UAE, China, and other institutional lenders.

The challenge for Pakistan is that it has an embarrassing history of not fulfilling IMF conditions. Pakistan’s immediate economic struggles have persisted for over three years, with the suspension of IMF’s bailout package in 2020, losses from floods in June 2022, and political mismanagement leading to an economic crisis in 2022, according to Geo-politik.IMF recently concluded its first round of “tough talks” with Pakistan and said that Fund would share nine tables, comprising macroeconomic and fiscal framework, with the Pakistani authorities which will pave the way for holding policy-level talks next week, reported Geo News.

If Pakistan and IMF reach a consensus by February 9, they will sign a staff-level agreement.

The authorities have massively revised the macroeconomic framework and shared it with the IMF under which the real GDP growth is projected to slash from 5 per cent to 1.5 to 2 per cent while inflation is going to escalate from 12.5 per cent to 29 per cent on average in the current fiscal year, reported Geo News.

The visiting IMF team has pointed out that the nominal growth is projected to cross the 30 per cent mark so the Federal Board of Revenue of Pakistan’s (FBR) tax-to-GDP ratio is bound to decline even if it achieves the envisaged annual tax collection target of Rs 7,470 billion, reported Geo News.