IMF Continues to Delay Signing Deal, Stalling Pakistan’s Economic Recovery

Pakistan’s economy has been struggling to recover from the impact of the COVID-19 pandemic, and its negotiations with the International Monetary Fund (IMF) have hit yet another roadblock. The IMF has been delaying signing a $7 billion loan deal with Pakistan, citing concerns over the country’s political stability and its ability to raise financial resources to narrow its balance of payments gap. The delay is becoming a source of worry for Pakistan’s economic future as the country grapples with various economic challenges.

Political Instability is the Main Hurdle 

According to diplomatic sources, the political situation in Pakistan has become a major factor in delaying a deal with the IMF. The global lenders, particularly the IMF, seek assurances from Pakistan that any future political setup in the country will respect any deal they sign with Islamabad. The expected elections in KP and Punjab, and the possibility of national elections soon after, have persuaded the IMF to think that the present government may or may not be there to implement the deal it signs. This uncertainty has made it difficult for the IMF to proceed with the loan deal.

Financial Assurances are Insufficient 

Pakistan has already implemented a series of policy measures that the IMF suggested, including increased taxes, higher energy prices, and increasing interest rates to the highest in 25 years. However, two major issues remain unresolved: financial and political assurances. The IMF wants Pakistan to show that it can raise enough financial resources to narrow its balance of payments gap. Since the IMF only provides a part of the loan a borrower needs, it requires the borrower to show that it has pledges from other lenders to bridge the gap. China, Saudi Arabia, and other partners have come forward with help offers, but the IMF thinks it is not enough. The government of Pakistan says that the gap is $5bn, but the IMF believes Pakistan needs $7bn.

What Does This Means for Pakistan?

The delay in signing the IMF deal is becoming a cause for concern for Pakistan’s economic future. Pakistan has been grappling with many economic challenges, including a high inflation rate, a large current account deficit, and a debt crisis. The IMF loan is crucial for Pakistan’s economic recovery, as it would help the country stabilize its economy, improve its balance of payments position, and create a conducive environment for investment. However, the political instability in the country and the IMF’s demand for financial assurances are making it difficult for the loan deal to go through.

Pakistan’s political leaders must put aside their differences and work together to address the country’s economic challenges. The government must provide the IMF with the necessary political and financial assurances to proceed with the loan deal. At the same time, the IMF needs to recognize Pakistan’s efforts to stabilize its economy and provide the country with the necessary financial support to recover from the impact of the COVID-19 pandemic.

The delay in signing the IMF loan deal is a cause for concern for Pakistan’s economic future. The country needs to urgently address its economic challenges and work towards a stable and prosperous future. It’s high time for the country’s political leaders to prioritize its economic interests over its political gains.

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