International Monetary Fund (IMF) chief, Kristalina Georgieva, has expressed her hope that Pakistan will not face financial crises like Sri Lanka and Ghana. The Pakistani government has met all the necessary requirements for receiving a critical $1.1 billion bailout from the international donor. However, Georgieva emphasized that it is best not to default and that Pakistan is not there yet.
Climate change poses a threat to Pakistan’s economy, says IMF Chief
Speaking at a news briefing in Washington, the IMF chief acknowledged the impact of climate change on Pakistan’s economy, citing her 2011 visit to the country and the recent flood that was more severe than the one she witnessed. Georgieva emphasized the need for Pakistan to create a policy framework that can avoid such crises and support the country in providing financial assurances to complete the IMF program successfully.
Pakistan has been working with the IMF on a three-year Extended Fund Facility (EFF) program that aims to address Pakistan’s economic challenges and implement structural reforms to boost growth, stabilize the economy, and reduce poverty. The program includes measures such as fiscal consolidation, monetary policy reforms, and structural reforms in the energy sector, public enterprises, and taxation.
In July 2019, Pakistan and the IMF agreed to a $6 billion bailout package over three years, with $1.4 billion disbursed in the first tranche. The country received the fifth tranche of the IMF loan worth $1 billion in March 2021. The sixth tranche of $500 million was due in September 2021 but has been delayed due to the COVID-19 pandemic.
Pakistan has been facing several economic challenges, including a high fiscal deficit, a large current account deficit, and a low level of foreign exchange reserves. The COVID-19 pandemic has further worsened the situation by leading to a decline in economic activity and a significant drop in exports and remittances.
However, despite the challenges, the Pakistani government has shown a strong commitment to implementing the IMF program and undertaking reforms to improve the country’s economic prospects. The government has taken several measures, such as increasing tax revenue, reducing current expenditures, and improving public financial management.
The IMF has praised Pakistan’s efforts, and Georgieva has acknowledged the government’s commitment to reforms, noting that the country’s economic indicators are showing signs of improvement. However, she also emphasized the need for continued efforts to address Pakistan’s challenges and implement structural reforms.
In addition to the IMF program, Pakistan has also received financial assistance from other international donors, such as the World Bank and the Asian Development Bank, to support its economic reform program. The country has also undertaken several measures to attract foreign investment, such as improving the business climate, enhancing the ease of doing business, and establishing special economic zones.
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Pakistan’s economic challenges are significant, but the country is making steady progress in implementing reforms and addressing its challenges. The IMF’s continued support and financial assistance from other international donors are crucial for Pakistan’s economic recovery and growth. The Pakistani government’s commitment to reforms and its efforts to improve the business climate and attract foreign investment are also essential for achieving sustainable economic growth and reducing poverty in the country.
