Pakistan and the International Monetary Fund (IMF) have finally signed an agreement after prolonged deliberations at home and abroad. The leading financial institution will provide US$3 billion as a Stand-By Arrangement (SBA) for a shorter period of just nine months. The IMF has already contributed almost half of the agreed SBA amount, while the remainder will be provided after the first review in due course of time.
The much-needed financial assistance from the IMF, along with friendly financial help from Saudi Arabia, United Arab Emirates (UAE), and China, will obviously help the federal government overcome the persisting economic crisis and stabilize the financial situation during the short time left at its disposal. The remainder will have to be undertaken and accomplished by the succeeding caretaker government at the national level. There are no words enough to praise and appreciate the leadership of Saudi Arabia, UAE, and China, as they have always responded positively whenever Pakistan needed their financial and other assistance during times of crisis and emergency, such as the devastating floods and deadliest heaviest rains last year and the current economic crisis due to foreign exchange reserves shortage.
The Extended Fund Facility (EFF) 2019, signed by the previous government, expired on June 30, 2023. Non-compliance with the agreed terms and conditions by the former regime created some mistrust between the two sides, which was one of the main reasons for the prolonged deliberations, even at the highest level between Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva, both in person and virtually. In fact, the Prime Minister took every opportunity while abroad in Paris or elsewhere to interact with the IMF MD and also telephoned her several times regarding the pending Pakistan-IMF deal, assuring her that all conditions have been implemented, and his government is committed to honoring all its commitments with the Fund sincerely and wholeheartedly.
It is generally said and believed that lenders impose stringent terms on borrowers, seeking assurances that every penny of the borrowed money will be honestly utilized for the intended purposes without any deviation. While this is true, the harshest and strongest terms and conditions levied by the IMF this time were unheard of in the past years. It is a bitter fact that if the previous government had honored and respected the terms and conditions of its 2019 agreement with the IMF, there would not have been such harsh, bitter, and cruel conditions imposed now when the government sought completion of the incomplete agreement and even when it sought a fresh deal for $3 billion as a Stand-By Arrangement with the IMF officials.
The new, much-needed, and negotiated agreement has been welcomed not only by the Prime Minister, whose concerted efforts made the impossible possible, but also by economic experts and stakeholders, especially the business community, and the IMF itself. They hope that it will help Pakistan streamline its economic strategy and problems. The leading international financial institution expressed similar optimism, stating that the SBA will support Pakistan’s immediate efforts to stabilize the economy from recent external shocks, preserve macroeconomic stability, provide a framework for financing from multilateral and bilateral partners, and create space for social and development spending.
One can only strongly endorse the pleas made by the Prime Minister to tighten belts, make concerted efforts to attain self-sufficiency, and break the begging bowl at the earliest possible. He rightly points out that sustained development can only be achieved by developing resources, standing on our own feet, and shouldering taxation and other responsibilities honestly, sincerely, and dedicatedly.
Since it came into existence, Pakistan has gone to the IMF 22 times under different regimes with periodic differences. The latest SBA, approved by the IMF Executive Board on July 12, 2023, marks the 23rd engagement. The hope is that this is the last time we have to seek this resort and that Pakistan can see through the requisite structural changes to get on a sustainable path of economic development.