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Review of deal with IMF and economic challenges

Present statistics showed that Pakistan’s economy faces tough challenges in this global environment and still has been struggling since previous year with spiraling fiscal deficit and current account, and steepening inflation rate in the previous 3-month. The economists also recorded that the large trade deficit has prompted officials to devalue the Pakistani rupee (PKR) by as much as 24 percent in the last year. In March 2019, the State Bank of Pakistan (SBP) revised its Gross Domestic Product (GDP) growth target down to a sluggish 3.5 percent, from the original target of approximately 6 percent. In April 2019, Pakistan Bureau of Statistics (PBS) recorded that the consumer price inflation (CPI) reached at 8.8 percent, up from nearly 3.8 percent at the corresponding period previous year. To boost the economy of the country, the present Government of Pakistan and International Monetary Fund (IMF) have agreed on terms for a $6 billion bailout package, to be disbursed over a span of greater than 3-years, bringing an end to months of negotiations with the international lender.

The agreement was confirmed through IMF which added that the funds will be disbursed over 39 months. But under its terms, sources mentioned that its currency would have to be devalued against the dollar, and gas and electricity prices will rise as well. Unluckily, statistics revealed that our country is facing a challenging economic environment, with lackluster growth, high inflation, high indebtedness, and a weak external position. This reflects the legacy of uneven and procyclical economic strategies in present years aiming to increase growth, but at the expense of growing vulnerabilities and lingering structural and institutional weaknesses.

International economic experts recorded that the economies basically are focusing to understand and determine the indicators of economic growth. Various indicators affect the economic growth they recorded, whereas the developing states have to face out not only the impact of their own policies on economy but also the affect and dictatorship of states or fi, nancial institutions, offering borrowing and investment in such states. The experts also recorded that yet borrowing has to be done to finance public expenditure and for the social welfare of the economy. The developing states such as Pakistan have huge pressure of bad policies implemented through the financial aid of IMF. The present IMF’s program of structural reforms would target growing government revenues and reducing spending, bringing down the primary fiscal deficit – which excludes development spending – to 0.6 percent of GDP in the country’s upcoming budget.


Statistics also show that the overall fiscal deficit presently stands at nearly 1.9 percent of the GDP. This program will include tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and enhance tax administration. International economic experts also recorded that IMF funding has been one of the most debated issues from the last few years in terms of its strategies, restrictions and its impact on the economy of states under IMF programs. Various studies have been done in this regard. However, the consequences of these studies are contradicting making this issue still debatable.

The most studied determinants showing the role of IMF on dissimilar economies counting Pakistan are exchange rate, political unrest, external debt, government borrowing, inflation, GDP, FDI and IMF charges. It is expected that this program would also target Pakistan’s loss-making state-owned enterprises and Pakistan’s energy sector, long plagued through structural challenges that have led to a burden of heavy subsidies on the government. This agreement would open up at least $2 billion in additional financing from the World Bank (WB) and the Asian Development Bank (ADB).

Various sources also recorded that Pakistan has availed 12 IMF stabilisation programs and bailouts since 1988, totaling roughly $18.9 billion in funds drawn. Pakistan’s last bailout, taken during 2013, was worth roughly $6.6 billion, with the program ending 3 years ago. Pakistan and the IMF are no strangers. Since 1958, they have made 21 agreements for loans, not including the most present one inked in May 2019.

Pakistan’s External Debt And Liabilities – outstanding (Million US$)
ITEM 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18 31-Mar-19
A. Public external debt (1+2+3)73,02475,35776,34078,46484,230
1. Government external debt62,93764,14265,38265,57468,412
i) Long term(>1 year)61,22762,52564,06164,53767,301
ii) Short term (<1 year)1,7111,6171,3211,0371,111
2. From IMF6,3436,0955,9625,9015,765
3. Foreign exchange liabilities3,7445,1214,9966,98910,052
B. Public sector enterprises (PSEs)2,7582,6712,6992,6693,478
a. Guaranteed debt1,4021,3841,3371,3352,175
b. Non guaranteed debt1,3561,2871,3621,3341,303
C. Banks4,6264,4164,4524,7764,846
a. Borrowing3,3812,9663,0103,3723,280
b. Nonresident deposits (LCY & FCY)1,2451,4501,4431,4031,566
D. Private Sector8,4359,1959,37110,08010,137
a. Guaranteed debt00000
b. Non guaranteed debt8,4359,1959,37110,08010,137
i). Loans7,2928,0498,2218,9188,950
ii) non-guaranteed bonds1212121212
iii) Trade credits733733733733733
iv) Other debt liabilities398401405418442
E. Debt liabilities to direct investors – Intercompany debt3,4453,5973,6353,0983,151
Total external debt (A+B+C+D+E)92,28895,23696,49799,086105,841

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