Amid the ongoing economic slump due to the coronavirus pandemic, Pakistan received a breather when the IMF approved a nearly $1.4 billion emergency loan. This will certainly cushion against the economic fallout and meet the balance of payment for a cash-starved and fledgling economy.
The global financial institution had waived off loans for 25 poorer countries but Pakistan will not among them and will instead receive a delay in repayment and cheap financing. The G20, a group of the world’s top economies, along with multilateral institutions have also debt relief and a moratorium on loans.
There is uncertainty amid the pandemic and economic fallout could be significantly high, and thus in these circumstances, developing countries need the funds urgently to mitigate the adverse impact. However, there is a slight catch as these come with strings attached and will eventually need to the repaid when the crisis subsides and the situation starts to improve.
It may be mentioned that the emergency loan is not the bailout package secures last year. The IMF said that discussion with Pakistani authorities on Extended Fund Facility (EFF) will resume as the situation improves. The new loan is issued under Rapid Financing Instrument (FRI), a low-cost and fast-disbursing initiative set up to deal with the adverse economic impact of the coronavirus crisis.
Although the Finance Ministry could take a sigh of relief over the temporary relief, it must be realised that these loans will also need to be made. The IMF and World Bank are institutions with a checkered past that have indebted poorer nations, particularly those facing a political or economic crisis. It cannot be expected that they would waive off debt and lose influence over them.
On the other side, Pakistan is also expected to receive $1.5 billion in relief on payment from G20, although the figure is subject to change. Pakistan only has financial relations with twelve of the G20 countries and the relaxation comes mostly from China. The country owes to several countries and should make efforts to revive the economy with strong policies and the capacity to act now.
The pandemic has brought new challenges for the prime minister and his economic team as they have been started from scratch to resurrect the economy. Efforts should be made that the country is not burdened with further loans and could explore options for economic revival during this period.
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