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IMF and Pakistan

Pakistan's latest $7 billion bailout from the IMF marks its 23rd program, highlighting a persistent cycle of financial dependency and economic mismanagement. The current program aims for sustainable public finances and tax revenue increases, but historical patterns suggest that without significant structural reforms, the country will continue to rely on the IMF for temporary relief. The ongoing challenges include high inflation, weak tax collection, and burdens from the energy sector and state-owned enterprises.

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10 views1 page

IMF and Pakistan

Pakistan's latest $7 billion bailout from the IMF marks its 23rd program, highlighting a persistent cycle of financial dependency and economic mismanagement. The current program aims for sustainable public finances and tax revenue increases, but historical patterns suggest that without significant structural reforms, the country will continue to rely on the IMF for temporary relief. The ongoing challenges include high inflation, weak tax collection, and burdens from the energy sector and state-owned enterprises.

Uploaded by

syedsuhaibharoon5
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

“Pakistan and Its Enduring Relationship with the IMF”

Pakistan’s latest $7 billion bailout from the International Monetary Fund (IMF) marks yet another
chapter in its ongoing cycle of financial dependency. Having entered its 23 rd IMF program, Pakistan
remains trapped in the vicious cycle of borrowing, economic mismanagement, and short-term fixes
rather than long-term sustainable solutions. With mounting external debt, record inflation, and a weak
currency, this bailout may provide temporary relief but history suggests it will do little to address the
root causes of Pakistan’s economic distress.

Pakistan sought IMF assistance for the 25th time this year following the failure of its 2019 program and a
worsening economic crisis. Last year, economic growth dropped to 2.4 percent, below the 2.6 percent
population growth rate. Tax collection was weak at 12 percent of GDP, with expenditures at 20 percent.
The energy sector and state-owned enterprises continued to be a burden. A near-default situation arose
in 2023 due to low exports and high import dependency, which was temporarily addressed by an
emergency arrangement with the IMF that concluded earlier this year.

The current IMF program for Pakistan aims to achieve sustainable public finances through gradual fiscal
consolidation by broadening the tax base and removing exemptions. The government plans to increase
tax revenues by 1.5% of GDP by FY25 and 3% over the program's duration. Key initiatives include taxing
retail, export, and agriculture sectors. Monetary policies will focus on reducing inflation, improving
financial access, and strengthening external reserves, with the State Bank of Pakistan maintaining a
flexible exchange rate. Energy sector reforms are also crucial, involving timely tariff adjustments. To
encourage private sector growth, the program seeks to reduce government interference, enhance
transparency in state-owned enterprises, and withdraw certain incentives and agricultural subsidies.

Through crises, financial failures, and desperate bailouts, the two always find their way back to each
other. With 23 programs and counting, it seems Pakistan has perfected the art of living on borrowed
money, while promising reforms that never really happen. Every few years, the economy stumbles, the
reserves dry up, and Pakistan goes on to knock on the IMF’s door, eagerly signing up for yet another
round of severe and tough conditions. The script remains unchanged: higher taxes, pricier electricity,
soaring inflation, and a struggling middle class, all in the name of stability. And just when things start
looking slightly better, the cycle repeats. Unless serious structural changes aren’t made, Pakistan will
keep going back to the IMF, where IMF always being ready to offer another lifeline at a hefty price.

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