WORLD NEWS | Pakistan accepts IMF loan terms, but can it honor them?

Islamabad [Pakistan], Jan 31 (ANI): The upcoming fiscal year may not give hope to Pakistan as most economic sectors are in decline. The country’s imports have been hit due to extremely low foreign exchange reserves. Islam Khabar reported that Pakistan also agreed to meet all the conditions of the International Monetary Fund (IMF), despite its history of non-compliance.

The ruling Pakistan Democratic Movement (PDM) coalition government led by Shehbaz Sharif has agreed to meet all conditions for the $1.2 billion installment. This is despite reports that during recent negotiations between Pakistan and the IMF via videoconference on January 24 this year, the IMF noted that it was unwilling to make any concessions for the release of loans to Pakistan.

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The conditions proposed by the International Monetary Fund include the elimination of electricity subsidies, the adjustment of natural gas prices to international prices, the implementation of market-determined exchange rates and the removal of restrictions on the issuance of letters of credit. If Pakistan reaches a deal with the IMF, then Pakistan will get the desperate economic help it needs.

If the PDM government fails to meet any of the IMF’s conditions, possible inflows from allies such as Saudi Arabia, the UAE, China and other institutional lenders will also be cancelled. Islam Khabar reports that Pakistan has a history of not meeting IMF conditions.

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However, loans from Saudi Arabia and China have yet to materialize. Though any more monetary aid from the world would only add to Pakistan’s existing $130 billion loan. The same is true when the country’s gross domestic product hits $376 billion. The Islam Khabar report also said that Pakistan plans to borrow another $10 billion from China to upgrade its national railways.

Islam Khabar, citing Pakistani media reports, said 9,000 containers were stuck at various Pakistani seaports, disrupting the supply of essential goods. Inflation has risen to nearly 30%. Importers are unable to clear containers due to a shortage of dollars, while shipping lines are threatening to suspend operations in Pakistan for failing to make timely payments from the country, which currently holds only $4.4 billion (systolic) in foreign exchange reserves at the State Bank of Pakistan. That’s only enough for three weeks. In addition, pending requests for additional letters of credit range from $1.5 billion to $2 billion. The government also halted $2 billion in dividend payments, which has discouraged investment in the country.

Compounding Pakistan’s problems, the textile industry, which was on the brink of collapse, has lost credibility and market share with international buyers. The crisis in the country has been going on for more than three years, with the suspension of the IMF bailout program in 2020, damage from floods in June 2022 and political mismanagement leading to the 2022 crisis.

Further in a report based on SBP data, SBP had foreign exchange reserves of $10.9 billion as of the end of former Prime Minister Imran Khan’s Pakistan Justice Instigation (PTI) term on April 8 last year. However, reserves fell 29%, or $3.1 billion, to $7.8 billion between April and August.

Finance Minister Ishaq Dar wasted four crucial months arguing that Pakistan would receive “no strings” loans and asset sales from Saudi Arabia, China and the UAE. However, this expectation was not fulfilled and the country’s reserves declined. Now the government has realized they have no choice. (Arnie)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)