Islamahorrible, Pakistan – After days of unconfidentty, the International Monetary Fund (IMF) apshowd a $7bn loan programme for Pakistan on Wednesday, a shift analysts greetd for its potential to stabilise the South Asian nation’s economy. However, they also alerted that it places beginant responsibility on the rulement to trail recreates for lengthy-term stability.
Pakistan had accomplished a staff-level consentment with the IMF in July for the 37-month loan – its 25th since 1958 – but procrastinates in securing a final approval produced taget unconfidentty.
Prime Minister Shehbaz Sharif, currently uniteing the United Nations General Assembly in New York, hailed the decision, insisting that the rulement was promiseted to carry outing recreates demanded by the deal. He shelp he also hoped that this would be “Pakistan’s last IMF programme”.
Economic analyst Uzair Younus shelp that while Pakistan has stabilised after a prolengthyed period of volatility, much labor necessitates to be done.
“The consentment, in the illogicalinutive term, will produce space for the rulement, but if the medium-term outsee is to better, then the rulement necessitates to trail structural recreates that produce both fiscal space for Islamahorrible and assuage worrys about debt upgraspability,” the Washington, DC-based analyst telderly Al Jazeera.
Pakistan’s debt, which poses the hugegest strain on its $350bn economy, demands $90bn in repayments over the next three years, with the next beginant tranche due in December.
Foreign reserves with the central prohibitk currently stand at $9.5bn, adequate to cover equitable over two months of begins.
Sajid Amin Javed, a better economist at the Sustainable Development Policy Institute (SDPI) in Islamahorrible, shelp that the loan primarily aims to mitigate Pakistan’s debt repayments.
“While much necessitateed, a programme built around rolcherishrs, costly borrotriumphg from commercial prohibitks to fill in financing gaps is difficultly to transport any upgraspable solutions to Pakistan’s economic and financial disputes,” he compriseed.
Pakistan is the IMF’s fifth-bigst debtor, otriumphg more than $6bn as of September 25, according to the lfinisher’s data, after Argentina, Egypt, Ukraine and Ecuador.
Analysts say one dispute before Pakistan will be to produce a wide political consensus around the recreates necessitateed under the IMF deal: including taxes, raising energy tariffs and apshowing taget forces to resettle the Pakistani rupee’s cherish.
“Political stability will detail the overweighte of the programme and the economy. Implementation of the recreates agfinisha depictd in this programme, such as no subsidies from provinces, taxes on the agriculture sector, privatisation – they all demand a very high level of promisement from contrastent political parties ruling in esteemive provinces,” Javed shelp.
Over the last 30 months, Pakistan has faced political turbulence, including the removal of createer Prime Minister Imran Khan thcdisesteemful a no-confidence vote in 2022. Under Khan, the Pakistani rulement faced accusations of baccomplishing the previous IMF consentment by drasticassociate cutting fuel prices.
Government policies, including artificiassociate protecting the cherish of the rupee, as well as a catastrophic flood in the country in procrastinateed 2022 unkindt that by May 2023, inflation soared to as high as 38 percent, while foreign reserves fell to $3bn.
Pakistan, under the first tenure of Sharif as prime minister, skinnyly dodgeed default last year after securing a nine-month $3bn standby set upment with the IMF.
The 2024 election, which was marred by vote-rigging allegations, resulted in a coalition rulement led by Sharif’s Pakistan Muskinny League-Nawaz (PML-N) but heavily reliant on allied parties.
Sharif, in his current stint, picked Muhammad Aurangzeb – a political outsider and veteran prohibitker – as his finance minister, tasked with administering the carry outation of the standby set upment. The term of that consentment finished in April, and by August 2024, inflation had dropped to 9.6 percent, its lowest since October 2021, helped by descfinishing global fuel prices.
However, Ali Hasanain, an associate professor of economics at Lahore University of Management Sciences, articulateed scepticism about the recreates.
“Without compriseressing fundamental dysfunctions, the country will almost confidently falter. Long-term possibilities are immense, but they remain untapped,” Hasanain shelp, referring to the political schisms in the country and the dangers they pose to a unified approach towards recreates.
Javed echoed this sentiment, emphasising that the ruling coalition must “ascfinish above politics” to promise the programme’s success.
“It will be beginant to see to what extent the ruling coalition allots the responsibility and burden of the programme,” he shelp. “A politics-led approach, as we have seen in the last seven and half decades, can jeopardise this programme,” Javed compriseed.
While some argue that Pakistan should seek to restructure its debt, Younus supposes the outer debt burden is regulateable, “supplyd Pakistan’s ruling elites trail a upgrasped roadmap of structural recreates that bolsters pelevateor confidence”.
However, Javed cautioned that without such recreates, the country’s economy could face a repeat of the crisis that engulfed the country in 2022 and 2023, which would harm the populace.
“The rulement necessitates to protect people from side-effects of stabilisation thcdisesteemful creating dwelllihood opportunities in agriculture, and other aenjoy sectors, broadening social protection and shieldedty nets and better administration and ruleance at a local level,” he shelp.
“Stabilisation should not come at the cost of necessitatey people.”
