Pakistan’s Economic Crisis: IMF Terms and Conditions for $1.1 Billion Loan
Pakistan is in the midst of an economic crisis and the International Monetary Fund (IMF) is the only hope for the country to avert a default. The IMF has proposed a $6.5 billion loan program and a $1.1 billion tranche is on the line. But in order to access the funds, Pakistan must agree to the IMF's terms, which include increasing the general sales tax by one percentage point to 18%, imposing the general sales tax on oil products, and accelerating the process of privatization. Talks between the two sides have been taking place since January 31 and are set to continue until February 9, 2021.
Furthermore, the country's foreign reserves have fallen to less than $3 billion, after dropping more than 30 percent in one month. This has put further pressure on the country to comply with the IMF's terms. Pakistan Prime Minister Shehbaz Sharif has stated that the IMF is giving a “tough time” to his country over the restoration of the bailout package at a time of “unimaginable” crisis.
The IMF has outlined a number of conditions that Pakistan must meet in order to unlock the $1.1 billion loan. These include increasing the interest rates significantly, increasing the power tariff, and imposing new taxes. Pakistan has already implemented some of the IMF’s conditions, including increasing the prices of petroleum products and further devaluing its currency against the US dollar.
Younus Khan, a Pakistani economist, has described a tale of two Pakistans: most Pakistanis are seriously suffering while a wealthy elite is benefitting from the country’s instability and inequality. It is essential to reach a staff-level agreement in the next several days in order to access the $1.18 billion tranche. It's now up to the Pakistani government to comply with the IMF's terms in order to secure the much-needed funds.
0. “Cash-strapped Pakistan continues IMF talks to tackle country's economy” The Jerusalem Post, 6 Feb. 2023, https://www.jpost.com/international/article-730791
1. “Pakistan says it agrees to IMF terms on release of $1.1bn payout” Al Jazeera English, 10 Feb. 2023, https://www.aljazeera.com/news/2023/2/10/pakistan-says-it-agrees-to-imf-terms-on-release-of-1-1bn-payout
2. “Tough times ahead for Pakistan as talks with IMF fails” The Siasat Daily, 11 Feb. 2023, https://www.siasat.com/tough-times-ahead-for-pakistan-as-talks-with-imf-fails-2524032/
3. “IMF talks end without staff level agreement” The Express Tribune, 10 Feb. 2023, https://tribune.com.pk/story/2400304/imf-talks-end-without-staff-level-agreement
4. “IMF Agreement” The Nation, 10 Feb. 2023, https://www.nation.com.pk/11-Feb-2023/imf-agreement
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