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Pakistan and the International Monetary Fund

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  IMF member states
  IMF member states not accepting the obligations of Article VIII, Sections 2, 3, and 4[1]

Pakistan has been a member of the International Monetary Fund (IMF) since 1950.[2] Due to the high unpredictable nature of its economy and its dependence on imports, the IMF has provided loans to Pakistan 22 times, with its most recent being in 2023.[3]

History

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Pakistan joined IMF on 11 July 1950 as newly established country was facing fiscal problems since its creation in 1947 from British India.

In 1958, for the first time, Pakistan went to IMF for bailout. For this, IMF lent out US$25,000 (equivalent to $264,014 in 2023) [originally the loan-amount is given in SDR;[4] for this article it is considered to be 1SDR = 1USD] to Pakistan on standby arrangement basis on 8 December 1958.[3] Pakistan again went to IMF in 1965. This time, IMF gave US$37,500 (equivalent to $362,566 in 2023) to war-torn nation on 16 March 1965.[3] Three years later, Pakistan again went to IMF for third time for balance of payment problems for which IMF gave US$75,000 (equivalent to $657,129 in 2023) on 17 October 1968.[3]

In 1971, Pakistan lost its Eastern half, East Pakistan, after the Bangladesh Liberation War. This war caused huge loses to Pakistan. For which, Pakistan got loan of US$84,000 (equivalent to $611,857 in 2023) in 1972, US$75,000 (equivalent to $514,768 in 2023) in 1973 and another of US$75,000 (equivalent to $463,360 in 2023) in 1974 to meet its growing needs.[3] In 1977, another standby arrangement of US$80,000 (equivalent to $402,241 in 2023) was made on urgent basis.[3] Three years later, an extended facility of US$349,000 (equivalent to $1,290,567 in 2023) was reached in 1980. Struggle of Pakistan continued, as Pakistan withdrew another US$730,000 (equivalent to $2,446,515 in 2023) in 1981 as Pakistan was already part of US cold war against Soviet Union.[3]

Another era was started, as democracy came back to Pakistan but old ways to handle economy poorly continued. Benazir Bhutto government withdrawn US$194,480 (equivalent to $501,030 in 2023) as standby arrangement and another US$382,410 (equivalent to $985,185 in 2023) in shape of structural adjustment facility commitment - both on 28 December 1988.[3] In 1990, government of Nawaz Sharif decided against going to IMF instead arranged donations from friendly countries like Saudi Arabia.

In 1993, Benazir Bhutto again came to power and her government again went to IMF and reached an agreement to get standby arrangement of US$88,000 (equivalent to $185,609 in 2023) on 16 September 1993.[3] Poor handling of economy continued by her government as she got loan of US$123,200 (equivalent to $253,260 in 2023) under the extended fund facility and another US$172,200 (equivalent to $353,988 in 2023) were borrowed - both on 22 February 1994.[3] During that period economy of Pakistan remained in poor shape and Pakistan had to go to IMF again for record third in the period of Bhutto government.[3] As per few sources, this was the most corrupt government in the history of Pakistan. This time Pakistan got an amount of US$294,690 (equivalent to $589,251 in 2023) on 13 December 1995.[3]

In 1997, Nawaz Sharif came to power. Benazir Bhutto government was sacked on the corruption charges and left economy of Pakistan in worst shape. Sharif government went to IMF on urgent basis for the first time and reached an agreement to get two amounts of US$265,370 (equivalent to $503,675 in 2023) and US$113,740 (equivalent to $215,880 in 2023) on October 20, 1997.[3]

On 29 November 2000, an amount of US$465,000 (equivalent to $822,713 in 2023) was drawn as standby arrangement.[5] One year later, Pakistan again went to IMF for US$861,420 (equivalent to $1,482,271 in 2023) under the extended fund facility on 06 December 2001.[5]

In 2008, Yousaf Raza Gillani received the largest-ever US$7.6 (equivalent to $10.76 in 2023) billion loan from the IMF,[6] however a total sum of $4,936,035 had been withdrawn.[5]

Pakistan was provided by the IMF with financial assistance amounting to US$4,320,000 (equivalent to $5,650,560 in 2023) through an Extended Fund Facility on September 04, 2013.[5]

In 2018, Imran Khan became Prime Minister of Pakistan. For this, they arranged friendly loans from Saudi Arabia, United Arab Emirates and China to avoid tough IMF conditions.[7] In 2019, when economic conditions worsened, they went to IMF for the twenty-second time for a loan of US$1 billion.[8] IMF gave loan based on conditions such as hike in energy tariffs, removal of energy subsidy, increase in taxation, privatization of public entities and fiscal policies to the budget.[7]

On 30 June 2023, the IMF and Pakistan reached an agreement at the staff level for a stand-by arrangement worth $3 billion. This agreement came at a critical time for Pakistan, as it was facing the risk of defaulting on its financial obligations.[9]

In July 2024, Pakistan reached a staff-level agreement for a new US$7 billion loan deal with the IMF.[10] Later in September 2024, the executive board of the IMF approved a USD 7 billion loan for Pakistan, which the country will receive in installments over 37 months.[11]

References

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  1. ^ Articles of Agreement of the International Monetary Fund, Article VIII – General Obligations of Members
    Section 2: Avoidance of restrictions on current payments;
    Section 3: Avoidance of discriminatory currency practices;
    Section 4: Convertibility of foreign-held balances.
  2. ^ "Pakistan and the IMF". IMF.
  3. ^ a b c d e f g h i j k l m "Pakistan has borrowed 21 times from IMF since Dec 8, 1958". www.thenews.com.pk. October 23, 2018.
  4. ^ "IMF Special Drawing Rights to US Dollar Exchange Rate Chart | Xe". www.xe.com. Retrieved 2022-04-09.
  5. ^ a b c d "Pakistan has borrowed 21 times from IMF since Dec 8, 1958". The News International. 24 October 2018. Retrieved 30 June 2023.
  6. ^ "Press Release: IMF Executive Board Approves US$7.6 Billion Stand-By Arrangement for Pakistan". www.imf.org.
  7. ^ a b "Is Pakistan on the way to living without the IMF?". www.cadtm.org. 11 June 2022.
  8. ^ Agency, Anadolu (May 16, 2019). "IMF bailout package — rescue or trap for Pakistan?". DAWN.COM.
  9. ^ "Pakistan secures critical $3bn nod from IMF in nick of time". DAWN.COM. 30 June 2023. Retrieved 30 June 2023.
  10. ^ "Pakistan reaches new $7 billion loan deal with IMF". AP News. 12 July 2024.
  11. ^ "The IMF approves a $7 billion loan for Pakistan, which will get $1 billion immediately". AP News. 25 September 2024.
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