Tuesday, September 27, 2022
HomeImran Khan'sIn 2018, Pakistan’s ex-prime minister Imran Khan turns to the IMF

In 2018, Pakistan’s ex-prime minister Imran Khan turns to the IMF

Imran Khan, the new prime minister of Pakistan, fought for office on a platform of breaking Pakistan’s dependence on aid from the West. He said his Pakistan Movement for Justice (PTI) would concentrate on recovering the billions of cash hidden from the taxman abroad instead of past governments that would beg the IMF for money. But on October 8, Mr. Imran khan changed his mind after less than two months in power. His finance minister declared that the administration would look to the IMF for a sizable loan.

Mr. Imran khan is not to blame for the economy’s problems. Under the leadership of the Pakistan Muslim League-Nawaz (PML-N), the previous administration increased annual GDP growth to a level of more than 5% for ten years. However, it did so at the expense of high-priced fuel and machinery imports, hurting export-oriented industries like textiles. As a result, since early 2016, the current-account deficit has dramatically increased (see left-hand chart). As a result, foreign exchange reserves have significantly decreased (see right-hand chart). They currently stand at $8 billion, which is insufficient to meet the anticipated cost of imports and repay the foreign debt through the end of the year.

The government urgently needs to find about $10 billion to keep the lights on (literally; many of Pakistan’s power plants operate on imported coal).

Even Mr. Imran khan recognized that Pakistan would require a loan. But he has been feverishly looking for alternatives to an IMF bailout during the last few weeks. He made a public appeal for all Pakistanis overseas to give the government $1,000 each, presumably to help pay for a large dam. He has demonstrated austerity in front of the public to demonstrate that government funds will no longer be wasted. Along with 61 high-end vehicles, the government auctioned off eight buffaloes retained to supply milk for the prime minister’s house.

Mr. Imran khan had held out hope as recently as October 7 that “friendly countries” would provide loans, sparing him the shame of approaching the IMF. Mr. Imran khan is visiting Saudi Arabia on his first official trip abroad. He has courted the country in particular. However, the Saudis made no bailout offer (Commerce Advisor Abdul Razzak Dawood lamented that it was “terrible to beg”). Instead, they offered to contribute to the $60 billion infrastructure project known as the China-Pakistan Economic Corridor (CPEC), primarily funded by China. That was abandoned because it appeared to enrage China, Pakistan’s “iron brother,” its oldest friend, and another possible donor.

Some analysts had hypothesized that China would raise its funding to Pakistan rather than allow the IMF to scrutinize the fine print of the contracts underlying CPEC, which have not been made public and are viewed as unfavorable to Pakistan. However, it doesn’t appear that even the threat of a dispute over CPEC was sufficient to convince China to take on the role of Pakistan’s last resort lender.

Investors panicked as Mr. Imran khan looked for sponsors. On October 8, the stock market experienced its largest daily decline in ten years, which undoubtedly contributed to the government’s reluctant turnaround the same day. According to journalist Khurram Hussain, the delay has made Mr. Khan’s negotiating position with the IMF about the terms of any loan weaker.

.. The fund will likely push for additional currency devaluation, increased tax collection, and higher interest rates, demanding a close examination of CPEC contracts to ensure Pakistan can finance them. None naturally corresponds to Mr. Imran khan’s pledge to establish an “Islamic welfare state.” If Mr. Imran khan wasn’t aware of this before taking office, he must now realize that Pakistan’s issues go beyond its corrupt leadership. Voters are soon learning that Mr. Khan, for all his assurance and star power, cannot make things better as quickly or simply as he promised if they weren’t sure of it before casting their ballots.

Pakistan Gets a $6 Billion Loan from the IMF.

Pakistan’s government requested a $6 billion, three-year loan from the International Monetary Fund (IMF) to assist in reviving the faltering national economy.

The IMF board approved the transfer of a $1 billion tranche to Pakistan on July 3. The program’s stated goals are to “support the authorities’ economic reform agenda,” “lower economic vulnerabilities,” and “create sustained and balanced growth,” according to a statement from the IMF.

The additional funding will be released gradually over the ensuing 39 months, with the fund reviewing Pakistan’s progress every three months.

According to Pakistan’s finance minister, Abdul Hafeez Shaikh, the loan will safeguard those most vulnerable while helping to “reduce imbalances in the economy.”

“To help our programmer of economic transformation, the IMF Board approved a $6 billion Extended Fund Facility (EFF) for Pakistan. Our policy encourages broad-based growth by addressing economic imbalances. Spending on social programmers has been increased to safeguard disadvantaged groups, “Tweets from Shaikh fully.

Last month, Islamabad announced its intentions to cut civil spending and freeze military spending while also approving the loan’s terms.

The government has declared its intention to hike taxes by $36 billion to reduce the widening fiscal imbalance significantly. The budgetary authorities in Pakistan have always had trouble collecting taxes.

Following multiple devaluations of the rupee, the national currency, high inflation, and rising utility costs, there is growing unrest in the nation.

In June, IMF mission leader Ernesto Ramirez Rigo stated that “Pakistan is confronting a tough economic environment, with mediocre growth, increased inflation, high borrowing, and a weak external position” due to a “legacy” of inconsistent policies.

Between April 29 and May 11, an IMF mission headed by Rigo was in Islamabad to discuss a rescue plan.

This IMF programmer, Pakistan’s 13th, has a primary budget deficit objective of 0.6 percent of GDP, excluding debt servicing costs.
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IMF Managing Director Christine Lagarde’s statement after she meets with Pakistani Prime Minister Imran Khan

Imran khan, the prime minister of Pakistan, met with Christine Laggard, the managing director of the International Monetary Fund (IMF), today in Dubai as part of the World Government Summit that the United Arab Emirates is hosting. Ms. Laggard made the following pronouncement following the meeting:

“I had a pleasant and fruitful conversation with Prime Minister Imran khan. We talked about recent economic developments and Pakistan’s prospects in the context of continuing negotiations for a programmer backed by the IMF.

“I emphasized once more that the IMF is prepared to assist Pakistan. I also noted that Pakistan could rebuild its economic resilience and establish the groundwork for greater and more inclusive growth if it adopted clear policies and a comprehensive package of economic reforms. To sustain people’s living standards, it is important to protect the poor and strengthen governance, as stated in the new government’s policy plan.

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