Lost in its bid to beef up its failing economy, Pakistan has negotiated for a new line of credit of $7bn from the International Monetary Fund (IMF) that it will be due to pay this month. The deal that has yet to be approved by the IMF Executive Board seeks to help ‘entrench stability in macroeconomic fundamentals and to establish the environment conducive to higher and more inclusive growth, ‘according to the statement from the global lender.
The South Asian nation, which has been facing ageing political instability, deadly floods, and other mismanagement challenges for more than thirty years, was at the edge of default last year. The fresh three-year loan syndication is the twentieth four flown to Islamabad from the IMF in more than six years, symbolizing continuing Pakistan’s economic woes.
However, the loan is conditioned by a rigid set of reforms, which has recently led to the rise of the country’s abnormally low tax wedge. For the fiscal year 2024-25, the government wants to collect a total of NT$1,430 billion in taxes, 40 per cent higher than the previous year’s proposed target. This and measures to contain fiscal deficits have triggered a public uproar, especially through fee and tax demonstrations.
These measures have been taken and perceived as nonsubstantial changes, which hold the view that they do not attempt to solve deep-rooted issues affecting Pakistan’s economy. Old patterns are visible again as far as the new IMF deal is concerned, said Ali Hasanain, an economics teacher and an Associate Professor at Lahore University of Management Sciences.
However, the IMF predicts an economic growth of 2% this year and an inflation rate of nearly 25% yoy, declining in 2025 and 2026. Now, the success of the most recent IMF loan package will hinge on Islamabad’s performance of the needed structural adjustments and solving the fundamental problems that have haunted the nation’s economic environment.
