Much-needed respite


Pakistan finds itself at a critical juncture, grappling with a severe economic downturn and a looming solvency crisis. In this dire situation, the importance of the International Monetary Fund (IMF) program cannot be overstated. After extensive negotiations, Pakistan has finally struck a comprehensive deal with the IMF, paving the way for much-needed financial assistance.
As things stand, the inordinate delay in the finalization of the new staff-level agreement with the IMF has already shut down global bond markets and other sources of funding – bilateral, multilateral and commercial – for Pakistan, while the country’s depleting foreign exchange stock is playing havoc with the exchange rate, exacerbating its economic challenges.
One of the primary reasons Pakistan is in desperate need of the IMF program is to address its mounting debt servicing and payment obligations. With its current financial constraints, Pakistan lacks the necessary funds to meet these obligations. The IMF program provides a lifeline by infusing much-needed capital into the country, enabling it to honor its debt payments and regain stability.
Without the IMF’s seal of approval, potential investors remain hesitant to provide financial support. The agreement with the IMF will help restore faith in Pakistan’s economic prospects, opening up avenues for funding from diverse sources and reinvigorating economic growth.
Coordinator to Prime Minister on Economy and Energy Bilal Azhar Kayani on Thursday said that $4.2 billion have been credited to Pakistan in last 3 days from Saudi Arabia, United Arab Emirates (UAE), and the International Monetary Fund (IMF).
Giving a breakup of figures, the coordinator tweeted that $2 billion were received from Saudi Arabia, $1 billion from UAE and $1.2 billion from IMF.
While the deal offers a respite to Pakistan’s ailing economy, experts warn the country is far from solving the structural problems that led to defaults in the past.
The incumbent and government and all major political parties need to rethink its performance and financial policies to show to the international creditors that it has what it takes to put its fiscal house in order. As Prime Minister Shehbaz Sharif said the IMF agreement is not a moment of rejoice, but to assess the state of affairs as to how the country has become dependent on loans and foreign grants.
There is no doubt the coalition government has made a few tough decisions and raised fuel and power prices despite strong opposition from the people and other political parties. Like many developing nations Pakistan has been confronted with the spectre of an economic collapse. The country has been among the most vulnerable states in this respect. The threat of a default may not have been unavoidable but it was close enough.
By finalizing the deal with the IMF, Pakistan can secure the necessary financial assistance to address debt servicing and payments, regain access to global markets, stabilize the exchange rate, and implement much-needed structural reforms. The IMF program represents a vital step towards reversing the economic downturn and ensuring the long-term solvency and prosperity of the country.