Pakistan’s economy suffers major setback as IMF denies $6 billion loan
The International Monetary Fund (IMF) has dealt another blow to Pakistan’s economy by rejecting the country’s claim of fulfilling the conditions necessary to secure a $6 billion loan. Pakistan signed an agreement with the IMF in 2019 to provide the loan upon meeting certain conditions. However, the funds have not been released due to Pakistan’s non-compliance with the conditions. Despite the authorities’ claims of fulfilling the necessary conditions, the IMF has refused to release the funds. This latest development is yet another setback for Pakistan’s struggling economy, which is already grappling with high levels of external debt and low foreign exchange reserves.
The rejection of Pakistan’s claim was made by the IMF Mission Chief to Pakistan, Nathan Porter. He stated that the IMF continues to work with the Pakistani authorities to bring the 9th review to a conclusion once the necessary financing is in place and the agreement is finalized. However, Porter’s statement contradicts the claims made by Pakistani authorities, including Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar, who have stated that they have fulfilled all prior actions necessary to complete the 9th review.
The external debt repayments, including interest, for the July-December period amount to $11 billion, and the country needs to arrange funds to repay the loans during the first half of the next fiscal year. However, Islamabad’s gross official foreign exchange reserves remain at a lowly $4.5 billion, and repayments owed to foreign debtors amounting to $4 billion are due by June this year. The IMF, already agitated by the government’s contradictory claims about the completion of the conditions, may not offer any major relief to Pakistan.
The rejection of Pakistan’s claim by the IMF is expected to exacerbate the economic crisis the country is currently facing. The country’s struggling economy has already led to rising inflation, high unemployment, and social unrest. With this latest development, the situation is likely to worsen, as Pakistan struggles to meet its external debt obligations and arrange financing to sustain its economy.