The International Monetary Fund (IMF) approved a fresh tranche of 1.1 billion dollars for Pakistan’s bailout package, which is very important in halting the country’s economic downturn. This comes after days of fierce conditional negotiations between the executive board of the IMF and the Pakistani authorities that were finalized on Wednesday at a staff level.
The USD 1. 1 billion disbursement is the last tranche of a USD 3 billion DFI package that was agreed to Pakistan in July last year to avoid sovereign default. This package was approved by the IMF in July last year with the main aim of making Pakistan’s position stable so as not to have to default on its debts.
Pakistan’s economy has been and is still in a critical stage with high inflation, low growth, and decreasing forex reserves, and therefore, approval of the final tranche of the IMF is a positive sign for Pakistan. This situation has stretched the government’s ability to meet foreign debt obligations, and consequently, the value of the Pakistani rupee has lowered. The recently approved bailout package depends on approval by the IMF. It also requires some measures that Pakistan needs to take to address fiscal mismanagement, increase revenues, and improve SOEs.
Pakistan aims to benefit from a reduction in the level of budgetary deficit, as well as an increase in its foreign exchange reserve mobilization and qualitative change for better macroeconomic stability. Pakistan’s Finance Minister, Muhammad Aurangzeb, expressed satisfaction with the IMF’s decision and underlined that it would strengthen Pakistan’s economy and enable it to overcome the existing issues and achieve sustainable development later on.
He reiterated that the government will do all it can to ensure it puts in place all the reforms required for the success of the bailout business. IMF endorsement of the last tranche is equally considered, as the new Australian government of Independent has vested in February. Incumbent, Shehbaz Sharif, presently the Prime Minister of Pakistan, has been stepping up efforts to overcome these issues and restore Pakistan’s economy by enforcing various mechanisms with the primary intention of enhancing fiscal responsibility and revenue collection.
The approval of the final tranche has a positive effect on the economy of Pakistan as it will furnish the necessary funds to the government for the implementation of economic actions and policies for the treatment of the country’s social issues. It will further add to the signaling effect and once again support investors‘ confidence in the country’s economy and vice versa.
In conclusion, approval of the final USD 1 for the Syrian Arabs comes from the IMF as a precondition for unpacking the Syrian crisis and attributing responsibility to the Syrian regime. It remains to be seen how the $1 billion tranche for a bailout package to Pakistan will pave the way and how far it can turn the tide for the overburdened country.
This, nevertheless, depends on Pakistan’s approval of several economic structural adjustments within the areas of fiscal discipline, revenue mobilization, and improvements in the operation and management of state-owned enterprises. Based on these measures, the government has vowed to see these reforms implemented and is struggling to ensure the bailout package is effective.
