Crisis-hit With the International Monetary Fund (IMF), Pakistan has agreed to a staff-level funding arrangement worth $3 billion (£2.4 billion).
After an eight-month delay, the agreement is now final, though the board of the international lender must still approve it. Since its separation from Britain in 1947, the South Asian country is currently experiencing its worst economic crisis. Pakistan’s central bank increased its benchmark interest rate on Monday to a record high of 22% in an effort to seal the deal.
An international energy crisis and the devastation caused by the floods that struck Pakistan last year have brought the country’s economy, which was already in trouble due to years of financial mismanagement, to its breaking point. According to Nathan Porter, the IMF’s mission leader for Pakistan, “The economy has experienced a number of external shocks, such as the devastating floods in 2022 that affected the lives of millions of Pakistanis and a spike in global commodity prices following Russia’s war in Ukraine.”
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Pakistan Inflation Reaches Worst in Years:
In May, the country’s annual inflation rate nearly broke the previous record.
Higher than anticipated, the $3 billion in financing will be dispersed over nine months. The final $2.5 billion of a $6.5 billion rescue package agreed upon in 2019 was still owed to Pakistan as of Friday. Over 230 million people live in the country, which has been working for years to stabilize its economy. The nation’s foreign exchange reserves decreased this year to a level that was only enough to support fewer than three weeks of imports. Financial markets have also been upset by deadly clashes between Imran Khan’s followers and the police in Pakistan.
“As a result of these shocks as well as some policy missteps… economic growth has stalled,” he continued. Such agreements, once reached at the staff level, are typically approved by the IMF’s Executive Board. In the upcoming weeks, the board is anticipated to evaluate the accord.
According to Michael Kugelman of the Wilson Centre think tank in the United States, “this deal gives Pakistan the economic breathing room it so desperately needs.” The question is whether it can change course from short-term relief to a long-term recovery using this IMF agreement, he continued.
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