https://sputniknews.in/20230630/accepting-imf-terms-could-cause-social-unrest-in-pakistan-expert-warns-2764357.html
Accepting IMF Terms Could Cause Social Unrest in Pakistan, Expert Warns
Accepting IMF Terms Could Cause Social Unrest in Pakistan, Expert Warns
Sputnik India
Pakistan must remain cautious of the “potential drawbacks” of accepting an International Monetary Fund (IMF) loan as it comes with strict conditions such as “extensive policy reforms and austerity measures”.
2023-06-30T19:29+0530
2023-06-30T19:29+0530
2023-06-30T19:29+0530
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Pakistan should remain cautious of the “potential drawbacks” of accepting an International Monetary Fund (IMF) loan as it comes with strict conditions such as “extensive policy reforms and austerity measures”, an expert has told Sputnik.Mohammed Saqib, the secretary-general of New Delhi-based think tank India China Economic and Cultural Council, said that accepting the western lender’s terms could be both “helpful and risky for countries facing economic challenges”.The think-tanker said that although the IMF loans could result in “temporary relief” for Islamabad, a focus on “short-term economic stabilization” could hinder “long-term structural issues and impede sustainable economic growth”.He said that the terms extended by the IMF to Pakistan could potentially limit the south Asian economy’s to “pursue development strategies and reduce policy autonomy and sovereignty”.Pakistan Announces Additional Taxes Worth Over $1 BillionPakistan’s economy has been reeling under the twin impact of the Covid-related global supply chain disruptions and the spillover effects of the Ukraine crisis. The devastating floods last year dealt a further blow to the economic recovery efforts.The World Bank has said that the floods have led to a loss of 2.2 percent of the Gross Domestic Product in FY 2022-23.In the lead-up to the IMF’s announcement on Thursday, Islamabad announced major fiscal reforms in the upcoming financial year which would witness the authorities raising over $1 billion in new tax revenues.In Pakistan, a fiscal year starts in July and concludes on 30 June.In its ongoing talks with Islamabad, the IMF has regularly called upon Islamabad to implement fiscal tightening measures to curb the Current Account Deficit (CAD).Islamabad has agreed to levy an additional levy of 60 Pakistani Rupee (PKR), or $0.21, per litre on petrol prices from Saturday.Additionally, Pakistani authorities will also reportedly increase the tax burden for salaried professionals.The measures were announced by Finance Minister Ishaq Dar during the conclusion of the federal budget debate in the National Assembly last week.The State Bank of Pakistan (SBP) reported this month that CAD had fallen by over 80 percent year-on-year (yoy) in the July-May period. However, the IMF has said that Islamabad’s efforts have borne little fruit as the reserves are at “very low levels” and there the power sector grapples with “liquidity” issues.In line with IMF’s demands, the State Bank of Pakistan has removed “import restrictions” on certain products and committed itself to a full determination of the market exchange rate, which may lead to further devaluation of the currency.Success of IMF Loan Depends on Pakistan’s Ability to Manage Economic ChallengesSaqib remarked that the success of the IMF loan to help the Pakistani economy tide over the economic crisis would entirely depend on the government’s economic management.He said it was difficult to predict at this stage whether Pakistan would face the “same consequences” as Argentina.The South American nation, which has been grappling with currency crisis and nagging inflation, has had a fractious relationship with the IMF over the western lender’s insistence on reducing the current deficit.Argentina struck a $44 billion with the IMF last year under re-negotiated terms after a $57 billion loan agreement fell through. The country witnessed large-scale street protests against terms of the IMF deal last year.The expert noted that Argentina has a “history of economic volatility and recurring financial crises” and its relationship with the IMF had been “complex”.He said that Pakistan, on the other hand, has had a “more stable relationship” with the IMF.
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Accepting IMF Terms Could Cause Social Unrest in Pakistan, Expert Warns
The International Monetary Fund (IMF) announced a staff-level agreement worth around $3 billion under an Extended Fund Facility (EEF) with Islamabad on Thursday.
Pakistan should remain cautious of the “potential drawbacks” of accepting an International Monetary Fund (IMF) loan as it comes with strict conditions such as “extensive policy reforms and austerity measures”, an expert has told Sputnik.
Mohammed Saqib, the secretary-general of New Delhi-based think tank India China Economic and Cultural Council,
said that accepting the
western lender’s terms could be both
“helpful and risky for countries facing economic challenges”.
“Given the devastating floods and economic instability Pakistan is currently facing, accepting these conditions could lead to social unrest and political instability. Additionally, it may result in a reduction of essential public services and lower living standards,” Saqib remarked.
The think-tanker said that although the
IMF loans could result in “temporary relief” for
Islamabad, a focus on “short-term economic stabilization” could hinder “long-term structural issues and impede sustainable economic growth”.
He said that the terms extended by the IMF to Pakistan could potentially limit the south Asian economy’s to “pursue development strategies and reduce policy autonomy and sovereignty”.
“This can create the perception of external interference and arm-twisting, potentially eroding national sovereignty and raising concerns about self-determination,” Saqib stated.
Pakistan Announces Additional Taxes Worth Over $1 Billion
Pakistan’s economy has been reeling under the twin impact of the Covid-related global supply chain disruptions and the spillover effects of the Ukraine crisis. The devastating floods last year dealt a further blow to the economic recovery efforts.
The World Bank has said that the floods have led to a loss of 2.2 percent of the Gross Domestic Product in FY 2022-23.
In the lead-up to the IMF’s announcement on Thursday, Islamabad announced
major fiscal reforms in the upcoming financial year which would witness the authorities raising over $1 billion in new tax revenues.
In Pakistan, a fiscal year starts in July and concludes on 30 June.
In its ongoing talks with Islamabad, the IMF has regularly called upon Islamabad to implement fiscal tightening measures to curb the Current Account Deficit (CAD).
Islamabad has agreed to levy an additional levy of 60 Pakistani Rupee (PKR), or $0.21, per litre on
petrol prices from Saturday.
Additionally, Pakistani authorities will also reportedly increase the tax burden for salaried professionals.
The measures were announced by Finance Minister Ishaq Dar during the conclusion of the federal budget debate in the National Assembly last week.
The State Bank of Pakistan (SBP) reported this month that CAD had fallen by over 80 percent year-on-year (yoy) in the July-May period. However, the IMF has said that Islamabad’s efforts have borne little fruit as the reserves are at “very low levels” and there the power sector grapples with “liquidity” issues.
In line with IMF’s demands, the State Bank of Pakistan has removed “import restrictions” on certain products and committed itself to a full determination of the market exchange rate, which may lead to further devaluation of the currency.
Success of IMF Loan Depends on Pakistan’s Ability to Manage Economic Challenges
Saqib remarked that the success of the IMF loan to help the Pakistani economy tide over the economic crisis would entirely depend on the government’s economic management.
He said it was difficult to predict at this stage whether Pakistan would face the “same consequences” as Argentina.
“While both countries have faced economic challenges and have been recipients of IMF assistance, their specific circumstances, policy choices, and economic structures differ significantly,” Saqib stated.
The South American nation, which has been grappling with currency crisis and nagging inflation, has had a fractious relationship with the IMF over the western lender’s insistence on reducing the current deficit.
Argentina struck a $44 billion with the IMF last year under re-negotiated terms after a $57 billion loan agreement fell through. The country witnessed large-scale street protests against terms of the IMF deal last year.
The expert noted that Argentina has a “history of economic volatility and recurring financial crises” and its relationship with the IMF had been “complex”.
“The consequences faced by Argentina, such as high inflation, social unrest, and political instability, result from a combination of factors, including domestic economic mismanagement, structural issues, and external shocks,” Saqib noted.
He said that Pakistan, on the other hand, has had a “more stable relationship” with the IMF.
“The country has received multiple IMF loans over the years and has implemented various structural reforms and austerity measures as part of these programs. The outcomes of these programs have varied, with some successes and challenges along the way,” the expert said.
