Pakistan has received financial support from the United Arab Emirates (UAE) and China totaling $1.3 billion, in a move aimed at giving the country’s ailing economy a much-needed boost. The funds will help Pakistan meet the conditions for the resumption of an International Monetary Fund (IMF) bailout.
The UAE has promised a billion dollars to prop up Pakistan’s forex reserves, which at their current level of $4.04 billion can barely pay for four weeks of imports. Meanwhile, China has released $300 million to Pakistan, which is the last tranche of a $1.3 billion rollover loan.
Pakistan signed a $6.5 billion bailout package with the IMF in 2019, but has failed to meet several conditions. As a result, only $3 billion has been released so far. The IMF insists that Pakistan must boost its tax base, end tax exemptions for the export sector, and raise artificially low petrol, electricity and gas prices meant to help low-income families.
Pakistan’s hopes for another round of IMF funding depend on friendly countries rolling over existing loans or providing additional support. The latest funding from UAE and China is expected to put Pakistan back on the IMF-laid track, according to Faisal Shaji, chief strategy officer at Standard Capital Securities.
Pakistan’s economy has been struggling amidst a simmering political crisis, with the rupee plummeting and inflation at decades-high levels. Devastating floods and a major shortage of energy have added further pressures. Year-on-year inflation hit 35.37 percent in March, the highest in nearly five decades, while the average inflation rate for the past year was 27.26 percent. Pakistan’s enormous national debt, currently at $274 billion, or nearly 90 percent of gross domestic product, makes the country particularly vulnerable to economic shocks.
Read other blog: Mahindra Group’s Chairman Emeritus Keshub Mahindra Passes Away