IMF deal: A band-aid for Pakistan’s economic cancer

 

By Rahul Dixit 

Pakistan is celebrating the agreement reached with the International Monetary Fund (IMF) that will inject USD 3 billion into the country’s struggling economy. The deal has fallen through after months-long negotiations as Pakistan stood on the brink of a default. A default would have been a major catastrophe for Pakistan as it seeks a way out of the economic mess created by its one-dimensional, selfish policies. The deal might help Pakistan for the time being but it is just a stand-by agreement (SBA) to make available limited funds spread over next nine months. The crisis is not over yet and the political leadership’s celebrations are totally misplaced. The IMF programme is just a band-aid and not a long-term solution for the perennially client State.

Though the IMF has come out with a statement that “the SBA will support the authorities’ immediate efforts to stabilise the economy” the fact remains that it is not part of the Extended Fund Facility (EFF) Programme which Pakistan signed with the IMF back in 2019. The IMF has conveniently kept it out of the long-term programme, leaving Pakistan with a modicum of funds to arrest the free fall of its economy. The band-aid solution is absolutely ineffective in stabilising the downfall that has caused unchecked inflation, forex crunch and rising debts. In this wake, the celebrations by Prime Minister Mr. Shehbaz Sharif and his Cabinet colleagues are nothing but mockery of the population.

As things stand, Pakistan will need USD 22 billion for its external payment obligations in the 2023-24 financial year. The larger than expected IMF help is too small in comparison with the debt obligations. Further, the political leadership in Islamabad is masking the stringent conditions the SBA has brought with it. It entails mobilisation of multilateral and bilateral financial support to ensure economic stability. With only a few of its supporters remaining to bail it out, filling the enormous gap is impossible. An economic crisis in Pakistan is inevitable.