Pakistan, grappling with a severe economic crisis, is once again looking to the International Monetary Fund (IMF) for a financial lifeline. However, the IMF’s commitment to a $7 billion bailout package has become increasingly uncertain, leaving Pakistan teetering on the edge of economic collapse.
In July 2023, Pakistan and the IMF reached a staff-level agreement on a 37-month Extended Fund Facility Arrangement (EFF) worth approximately $7 billion. This marked Pakistan’s 24th bailout from the IMF, a record for any country in the world, highlighting the country’s long-standing dependence on the global lender.
The IMF bailout was initially expected to be approved by the Executive Board in August 2023, but the process has been plagued by delays, raising concerns in Islamabad. The delay, initially attributed to technical reviews, is now seen by some officials as a deliberate tactic by the IMF to pressure Pakistan into making further concessions.
Pakistan’s Deputy Prime Minister Ishaq Dar has publicly criticized the IMF, accusing the global lender of intentionally delaying the disbursement of funds. He alleges that geopolitical factors are at play and that there have been deliberate attempts to sabotage Pakistan’s economic recovery.
While the IMF has remained silent on the issue, observers and officials point to several factors contributing to the delay. The most significant challenge is Pakistan’s inability to secure debt relief from its creditors, particularly China, which holds a substantial portion of Pakistan’s debt. Pakistan has requested Beijing to defer payments on its $15 billion debt in the power sector, but a response is yet to be received.
Another major sticking point for the IMF is Pakistan’s continued subsidies, which go against the IMF’s requirements for fiscal discipline. The Punjab province recently launched a $160 million electricity subsidy plan, which has been cited as a key obstacle to securing IMF approval.
The ongoing delay in the IMF bailout poses a significant risk to Pakistan’s economic stability. Without the IMF loan, the country faces a debt-repayment obligation of over $26 billion, further exacerbating its financial woes. The economy is shrinking, inflation is soaring, and the rupee is struggling against the dollar, squeezing the purchasing power of ordinary citizens and driving them further into poverty.
Despite the grim outlook, some experts remain optimistic that a deal will eventually be reached. They argue that the IMF is unlikely to abandon Pakistan entirely, given the potential consequences of a complete economic collapse. However, the delays and the growing uncertainty surrounding the IMF bailout are a stark reminder of the precarious economic situation facing Pakistan, and the challenges it faces in securing a sustainable path to recovery.
