With economy on the brink, Pakistan grapples to secure lifelines

Related News Ind vs Pak: India may be favourites but banish fear of losing, PM Imran Khan tells captain Sarfaraz India hasn’t come out of its poll mindset, Pakistan will engage on ‘basis of equality’, says Qureshi A few moments in nine hours: How Pakistan got a very cold shoulder Pakistan Prime Minister Imran Khan. (File) Despite interest payments on domestic and foreign loans accounting for over 30 per cent of the $35 billion union budget presented by the Imran Khan-government last week, Pakistan is banking on two fresh loans to bolster the country’s emaciated, debt-ridden economy. Advertising While the International Monetary Fund (IMF) had reached a preliminary agreement last month on a $6 billion bailout for Pakistan, a rescue plan that Prime Minister Khan had opposed before taking office but has since grudgingly accepted, fresh talks by his administration over a support package from Manila-based Asian Development Bank have stoked further controversy. In a snub of sorts, the ADB has distanced itself from statements by two senior members of the Khan-led administration that the Manila-based lender would provide $3.4 billion support to Pakistan, instead clarifying that “these discussions are ongoing”. The desperation for lifelines such as the ADB loan underscores Pakistan’s increasing reliance on lenders as the country tries to overcome a ballooning Balance-of-Payments crisis that threatens to cripple its economy. Much of this stems from the imbalances arising from Pakistan’s surging current account deficit, exacerbated by the country’s increasing debt to China, short supplies of foreign currency reserves and stagnating growth. With the economy in a tailspin, policy makers have repeatedly tried talking up the markets. On Monday, State Bank of Pakistan Governor Reza Baqir at a press conference expressed confidence in the country’s economic future, and provided assurance that the “two main causes of our instability are being effectively addressed in a credible manner”. Advertising Over the weekend, Khan’s adviser on finance Abdul Hafeez Shaikh and the Federal Minister for Planning, Development and Reforms Khusro Bakhtiar had announced that the country would get a loan of $3.4 billion for budgetary support from the ADB, out of which $2.1 billion would be released within a year. This prompted a rare rebuff by the Manila-based Bank. In a statement issued on Sunday, the ADB, while confirming the meetings with the Pakistani government members, asserted the loan was still a work-in-progress. “These discussions are ongoing and details of the plans as well as the volume of ADB’s financial support, once finalised, will be contingent upon the approval of ADB management and its Board of Directors,” ADB’s Country Director for Pakistan, Xiaohong Yang said. Meanwhile, funding plan involving the IMF, which comes after months of negotiations and still needs approval from the Fund’s Board, is expected to be provided over three years. In a May 2019 statement, the IMF said Pakistan faces a “challenging economic environment, with lacklustre growth, elevated inflation, high indebtedness, and a weak external position”. It said the funding programme would support authorities’ strategy for stronger growth by “improving the business environment, strengthening institutions, increasing transparency, and protecting social spending”. The IMF bailout funding is typically provided under stringent conditions and most analysts predict that any fresh IMF injection could harm Khan’s promise to build a welfare state. The IMF forecasts Pakistan’s economic growth will slow to 2.9 per cent this fiscal year from 5.2 per cent in 2018. In February, central bank had only $8 billion left in foreign reserves. Abdul Hafeez Shaikh, an economic advisor to the prime minister, said foreign loans have now crossed $90 billion, and exports have contracted over the past five years. Let's block ads! (Why?)

With economy on the brink, Pakistan grapples to secure lifelines
imran khan, asian development bank, pakistan loan, pakistan govt loan, pakistan economy, pakistan economic crisis, indian express
Pakistan Prime Minister Imran Khan. (File)

Despite interest payments on domestic and foreign loans accounting for over 30 per cent of the $35 billion union budget presented by the Imran Khan-government last week, Pakistan is banking on two fresh loans to bolster the country’s emaciated, debt-ridden economy.

While the International Monetary Fund (IMF) had reached a preliminary agreement last month on a $6 billion bailout for Pakistan, a rescue plan that Prime Minister Khan had opposed before taking office but has since grudgingly accepted, fresh talks by his administration over a support package from Manila-based Asian Development Bank have stoked further controversy. In a snub of sorts, the ADB has distanced itself from statements by two senior members of the Khan-led administration that the Manila-based lender would provide $3.4 billion support to Pakistan, instead clarifying that “these discussions are ongoing”.

The desperation for lifelines such as the ADB loan underscores Pakistan’s increasing reliance on lenders as the country tries to overcome a ballooning Balance-of-Payments crisis that threatens to cripple its economy. Much of this stems from the imbalances arising from Pakistan’s surging current account deficit, exacerbated by the country’s increasing debt to China, short supplies of foreign currency reserves and stagnating growth.

With the economy in a tailspin, policy makers have repeatedly tried talking up the markets. On Monday, State Bank of Pakistan Governor Reza Baqir at a press conference expressed confidence in the country’s economic future, and provided assurance that the “two main causes of our instability are being effectively addressed in a credible manner”.

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Over the weekend, Khan’s adviser on finance Abdul Hafeez Shaikh and the Federal Minister for Planning, Development and Reforms Khusro Bakhtiar had announced that the country would get a loan of $3.4 billion for budgetary support from the ADB, out of which $2.1 billion would be released within a year. This prompted a rare rebuff by the Manila-based Bank. In a statement issued on Sunday, the ADB, while confirming the meetings with the Pakistani government members, asserted the loan was still a work-in-progress. “These discussions are ongoing and details of the plans as well as the volume of ADB’s financial support, once finalised, will be contingent upon the approval of ADB management and its Board of Directors,” ADB’s Country Director for Pakistan, Xiaohong Yang said.

Meanwhile, funding plan involving the IMF, which comes after months of negotiations and still needs approval from the Fund’s Board, is expected to be provided over three years. In a May 2019 statement, the IMF said Pakistan faces a “challenging economic environment, with lacklustre growth, elevated inflation, high indebtedness, and a weak external position”. It said the funding programme would support authorities’ strategy for stronger growth by “improving the business environment, strengthening institutions, increasing transparency, and protecting social spending”.

The IMF bailout funding is typically provided under stringent conditions and most analysts predict that any fresh IMF injection could harm Khan’s promise to build a welfare state. The IMF forecasts Pakistan’s economic growth will slow to 2.9 per cent this fiscal year from 5.2 per cent in 2018. In February, central bank had only $8 billion left in foreign reserves. Abdul Hafeez Shaikh, an economic advisor to the prime minister, said foreign loans have now crossed $90 billion, and exports have contracted over the past five years.

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