Pakistan has secured inflows of funds from bilateral institutions and friendly countries this week to prop up its foreign exchange reserves, in a major boost for the cash-strapped nation. The government, which ends in less than a month, is certainly relieved the immediate funding needs have been fulfilled.
Pakistan received $2bn deposit from Saudi Arabia and one billion dollars from the UAE. The IMF also approved the short-term standby agreement reached last month and immediately transferred $1.2bn to the central bank’s account. The foreign exchange reserves will reach $13-14bn this week. The next two installments by the IMF will be received in November and February next year, and there will hopefully be a new government to review economic policies.
Once again, the funds from the IMF and friendly Arab countries have saved the day. The question remains how much longer will this cycle continue that the nation has go knocking whenever there is a crisis. The government claims that this will hopefully be the last time and country is on the path to prosperity and development. Successive governments have made similar claims and Pakistan has gone to the IMF 22 times.
After the latest agreement, Pakistan is now the fourth-largest borrower with $10.4 billion in debts. It has overtaken Ecuador and is the largest borrower in Asia. It only trails Argentina, Egypt and war-affected Ukraine. In August 2022, the IMF extended $1.1bn to Pakistan as part of a $6.5bn programme agreed back in July 2019. Pakistan faced an acute balance of payments crisis due to internal political wangling and spillover of Ukraine conflict and was compelled to once again make last-ditch efforts.
The government should make efforts for economic revival so that the nation doesn’t have to approach the IMF again. The civil and military leadership have taken the initiative to bring economic reforms or trigger an agricultural revolution. These are long-term measures and should be welcomed but efforts should be made to provide relief to the masses reeling under the economic crisis.
The government should focus on economic liberalization to loosen regulations and restrictions in the economy in exchange for greater participation by private sector. This is the best solutions to economic development and will boost exports and attract foreign investment. Or else, we will find ourselves knocking at the doors of the IMF once again.
