Pakistan and the IMF have reached a new agreement securing a $6 billion bailout for the cash-strapped country, officials said Sunday, following months of painstaking negotiations betweethe two sides.
The agreement marks Pakistan’s 22nd bailout with the Fund, as the country struggles to stave off a looming balance-ofayments crisis while its economy teeters due to low growth, soaring inflation, and mounting debt, agency reports.
“The programme aims to support the authorities’ strategy for stronger anmore balanced growth by reducing domestic and external imbalances, improvinthe business environment, strengthening institutions, increasintransparency, and protecting social spending,” said Ramirez Rigo, head of thIMF delegation, in a statement released late Sunday.
According to Pakistan’s finance advisor Abdul Hafeez Sheikh the country iset to receive $6 billion from the IMF in addition to $2 to $3 billion frothe World Bank and Asian Development Bank over the next three years.
“We have a $12 billion gap in our annual payments and we don’t have thcapacity to pay them,” Sheik said in a televised address as he announced thnew agreement with the fund.
Analysts have warned that any fresh IMF deal would likely come with myriarestrictions that could hobble Prime Minister Imran Khan’s grand promises tbuild an Islamic welfare state, as the country is forced to tighten its pursstrings.
– Battered economy –
The deal with the IMF comes weeks after Sheikh — a former World Banofficial who was Pakistan’s finance minister from 2010-2013 — was appointeas “adviser on finance” after Finance Minister Asad Umar resigned amid wide-ranging cabin reshuffle.
The abrupt resignation of Umar — one of Khan’s most powerful ministers was particularly shocking due to his perceived role in overseeing the vitanegotiations with the IMF over the long-delayed bailout.
The announcement comes as discontent is already growing over measureKhan’s government has taken to fend off the crisis, including devaluing thrupee by some 30 percent since January 2018, sending inflation to five-yeahighs.
A government report published Friday also noted that Pakistan’s growtrate is set to hit an eight-year low, with the country’s GDP rate likely tsink to 3.3 percent against a projected target of 6.2 percentPakistan has had 21 bailouts since it joined the IMF in 1950. Its mosrecent loan was issued in 2013, worth $6.6 billion.
The United Arab Emirates — Pakistan’s largest trading partner in thMiddle East and a major investment source — recently offered $3 billion tsupport the battered economy.
Islamabad also secured $6 billion in funding from Saudi Arabia and struca 12-month deal for a cash lifeline during Khan’s visit to the kingdom iOctober.
However the influx of Gulf cash failed to reverse the economic headwindbattering Pakistan, as high fuel prices, low tax yields, and rising inflatiohave kept the country off balance.
The crisis also comes as Pakistan is facing possible sanctions from thFinancial Action Task Force — an anti money-laundering monitor based iParis — for failing to rein in terror financingThe organisation will soon decide whether to add Pakistan to a blacklist
that would trigger automatic sanctions, further weakening Pakistan’s already faltering economy.
To add to its woes, the United States has also warned that it will be watching closely to ensure Pakistan does not use IMF money to repay debts to China, which has poured billions into the country for infrastructure projects
under its Belt and Road Initiative.
US President Donald Trump has already proven to show little sympathy for Pakistan, after last year cutting $300 million in military aid that had been flowing over logistical assistance to US forces in Afghanistan.