How Did Military-Dominated Pakistan Secure A $1 billion Lifeline From IMF? Is The Money Financial Aid Or A Loan? News24 –
The IMF’s sanction of a $1 billion lifeline to Pakistan was reportedly linked to U.S. pressure for a ceasefire, with the remaining funds contingent on full compliance. Reports following the IMF meeting suggested that the U.S. had “pressured” the Islamic country to de-escalate tensions with India. A day later, further reports emerged indicating that Prime Minister Shehbaz Sharif was seeking mediation from countries like the U.S., China, and Saudi Arabia to initiate a ceasefire, driven by dwindling ammunition supplies and fears of a potential military coup. Pakistan’s DGMO also spoke to the Indian counterpart, requesting a ceasefire.
On Friday, May 9, the Executive Board of the International Monetary Fund (IMF) agreed to release $1 billion (around ₹8,500 crore) to Pakistan right away. This money is part of a larger loan program called the Extended Fund Facility (EFF), which helps countries facing serious economic challenges.
The EFF for Pakistan was approved in September 2024 and is set to provide a total of $7 billion over 37 months. With this latest payment, Pakistan has now received about $2.1 billion from the IMF under this arrangement. Now, we will discuss why Pakistan is eligible for the $7 billion lifeline.
What The IMF Does
The International Monetary Fund (IMF) is a global financial institution that works to promote international economic stability and growth. The International Monetary Fund (IMF) is a global organisation that was created in 1944. Its main job is to help keep the world’s money systems stable and working well. The IMF is based in Washington, D.C., and has 190 member countries, almost all the countries in the world. It gives loans to countries that are going through serious financial problems, like high debt or a weak currency. These loans are not free; countries must follow certain rules and make changes to fix their economies. The money the IMF uses comes from its member countries, and how much each country gives depends on the size of its economy.
Pakistan Eligible For IMF’s EFF?
Pakistan has been striving to become a military power since the 1980s. Despite it’s hard work, Pakistan’s economy has been becoming weaker by each passing decade. Now, the country is on the brink of bankruptcy. Pakistan’s overall GDP has remained largely unchanged over the past decade. While the growth has stagnated, the inflation has soared. According to an Indian Express report, the inflation rate in the past five years has been 10.7% (2020), 8.9% (2021), 12.2% (2022), 29.1 (2023) and 23.4% (2024). In other words, a basket of goods that cost an average Pakistani Rs 100 at the end of 2019 was priced at Rs 215 by the end of 2024.
Pakistan’s debt is increasing for several reasons. Different governments have poorly managed the economy. The population is growing quickly, but people are saving very little money. The country also does not invest enough in things like roads, schools, and hospitals. In addition, not many women are part of the working population, which limits economic growth. Not only from IMF, Pakistan has also sought funds from many other countries and financial groups. These include China, the United Arab Emirates (UAE), Saudi Arabia, and international lenders like the Paris Club, the Islamic Development Bank, the Asian Development Bank, and the Nordic Development Fund.
IMF Approved The Latest Tranche
The decision by the IMF to grant funds to Pakistan was taken after a review and assessment of Pakistan’s policy and administrative reforms undertaken by the Pakistan government. IMF found that Pakistan’s policy efforts under the EFF have reportedly led to significant progress in stabilising its economy and restoring investor confidence, despite a challenging global environment. This led them to process Pakistan’s request. Reports suggest that the steadfast implementation of the FY2025 budget and the approval of key fiscal reforms, particularly the Agricultural Income Tax, are seen as critical steps in restoring the credibility of Pakistan’s policymaking process.