New Delhi: Pakistan repeatedly goes to the International Monetary Fund (IMF). A whopping number of 23 programs clearly show that Pakistan is accustomed to the fund’s tough love.
“In fact, we are the most loyal clients of the IMF,” said Murtaza Syed, former deputy governor of the State Bank of Pakistan.
Argentina comes in second with 21 programs.
“In contrast, our midnight twin India has been to the IMF only seven times and never since the historic Manmohan Rao reforms of 1991,” Syed said.
He said running to the global emergency ward 23 times in 75 years is no way to run a country.
“Pakistan today has less than $3 billion in foreign exchange reserves. Never in our history have our reserves exceeded $21 billion. Bangladesh has about $35 billion, India has about $600 billion and China has about $4 trillion. Since the early 1990s, Pakistan has 11 IMF programs, Syed said. Bangladesh has three. India and China have none.
Pakistan’s economy has been in trouble for months before the devastating summer floods. Madiha Afzal, economist for Brookings, wrote that inflation is back-breaking, the value of the rupee has fallen sharply, and its foreign reserves have now collapsed, increasing the likelihood of a default.
Pakistan experiences an economic crisis every few years, stemming from an economy that does not produce enough and spends too much, and is thus dependent on external debt. Each successive crisis gets worse as the debt bill gets bigger and the payment becomes due. Internal political instability and the devastation of floods this year have made it worse. There is also a significant external element to the crisis, along with rising global food and fuel prices in the wake of Russia’s war in Ukraine. Afzal said that the combination of all these factors has given Pakistan its biggest economic challenge ever.
According to a report in the Wall Street Journal (WSJ), Pakistan will have to repay $73 billion by 2025, according to Topline Securities, a Pakistani stockbroker.
Experts say it may not meet that obligation, meaning that even if it does return to the IMF program, it will still need to negotiate debt restructuring down the line. The WSJ pointed out that such a process is a type of default, as it involves negotiating loan forgiveness and repayment rescheduling.
Elections are to be held by October as per Pakistan’s constitution, so any debt restructuring by the next government would be likely. Unlike Sri Lanka, the country has relatively little debt owed to foreign bondholders, making restructuring easier. The WSJ reported that nearly one-third of external debt is from close ally China.
Charles Robertson, global chief economist at Renaissance Capital, an emerging markets investment bank, said Pakistan’s debt burden puts it in the same category as some developing countries that have already defaulted, such as Sri Lanka, and others. are sensitive to defaults. , like Egypt, the WSJ reported.
“Pakistan will struggle to deal with this year. A default looks likely, but it is not a given,” Robertson said, adding that Pakistan can still take measures to resolve the situation.
China chose Pakistan – one of its closest allies, with deep military ties and a common rival in India – as a showcase for its investment in the developing world. The WSJ reported that Beijing has spent about $25 billion on roads, power plants and a port here.
(Except for the headline, this story has not been edited by Zee News staff and is published from a syndicated feed)