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Pakistan Secures $6 Billion IMF Bailout to Ease Economi...

Business Maverick

Business Maverick

Pakistan Secures $6 Billion IMF Bailout to Ease Economic Crisis

A person reads a Pakistani newspaper with a picture of Imran Khan, head of Pakistan Tehrik-e-Insaf (PTI) political party, on the front page a day after general elections in Karachi, Pakistan, 26 July 2018. Millions of Pakistanis turned out for parliamentary elections on 25 July, despite the threat of violence by extremist militant groups. Voters had to choose from 11,000 candidates to elect 272 members of the Parliament for the next term. EPA-EFE/REHAN KHAN
By Bloomberg
13 May 2019 0

Pakistan and the International Monetary Fund reached an agreement on a loan of about $6 billion designed to help the South Asian nation avert an economic crisis.

The IMF’s executive board will meet to approve the agreement for the 39-month loan, “subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments,” IMF’s mission chief Ernesto Ramirez Rigo said in a statement.

The loan would represent the 13th bailout since the late 1980s from the IMF to Pakistan, which is facing a balance-of-payments crisis triggered by high fiscal and current-account deficits and dwindling foreign exchange reserves. The pact was reached after Prime Minister Imran Khan overhauled his economic team, including the installation of Reza Baqir, who previously served in senior positions at the IMF, as the central bank governor.

Rigo noted the efforts to stabilize the nation’s economy but said more needs to be done.

“Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path,” he said.

Rating Downgrade

Abdul Hafeez Shaikh, an economic adviser to the prime minister, told state-run Pakistan Television that there had been some overspending by the government, so to “recover costs we will have to increase prices in certain areas of the economy.” The IMF facility “should be taken as a program of structural changes” and its success depends upon how successfully the country implements it, he said.

The crisis prompted rating companies to downgrade Pakistan’s credit score, triggering an 18% slide in the nation’s currency and pushing the benchmark KSE-100 Index of stocks to near the lowest level in almost three years.

“This bailout package should be a positive in the medium to long run, provided the reform agenda is religiously pursued,” said Khurram Schehzad, chief executive of financial advisory firm Alpha Beta Core.

Prime Minister Khan has faced criticism from economists and the opposition parties for delaying the loan and mishandling the economy. Khan had said the loan program was delayed as he set about securing $3 billion of loans each from Saudi Arabia, the United Arab Emirates and China.

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