The International Monetary Fund (IMF) is reportedly planning to forbid Pakistan from seeking additional loans from China. According to reports, the global financial body’s recommendations are now likely to be a deciding factor in Islamabad’s decision to ask China for Rs 7.9 billion for projects related to the China-Pakistan Economic Corridor (CPEC).
The IMF has criticised Pakistan’s loans from China and the arbitrarily high payments given to Chinese Independent Power Producers (IPP), suggesting Islamabad renegotiate its energy contracts with Beijing, ANI reported, citing Financial Post.
According to the report, several Chinese IPPs operating in Pakistan are owed more than Rs 350 billion in power payments. Meanwhile, IMF’s demand came after China denied changing the terms of the agreements for projects under the CPEC. Moreover, around 40% of Pakistan’s federal budget’s total spending, around Rs 3,950 billion has been devoted to debt service – an increase of 29.% from the last year. Pakistan’s economy is facing a daunting task as the budget for FY 2022–23 does not address the crucial structural problems that are proving to be a barrier to the resurgence of the country.
Pakistan’s revival lies in revival of IMF’s Extended Fund Facility
According to reports, Pakistan’s economy is already severely hampered by a massive deficit, and the continuous surge in inflation poses a serious risk of impending default. Meanwhile, the federal budget of USD 47 billion proposed by Pakistan’s Finance Minister Miftah Ismail for the upcoming fiscal year has not done much to address the core issues facing the country’s economy. As Pakistan’s traditional allies have failed to help the nation, its only hope lies in the revival of the IMF’s Extended Fund Facility. However, the UN financial body voiced its disappointment and displeasure with the budgetary measures taken to satisfy its requirements to reinstate the USD 6 billion funds.
Pakistan’s trade imbalance reaches an all-time high
Meanwhile, Pakistan’s trade imbalance increased significantly by 57% to reach an all-time high of USD 48.66 billion in the current fiscal year from USD 30.96 billion the previous year. The trade deficit rose to alarming levels, despite a ban imposed on imports of over 800 non-essential luxury items by the Pakistan government in May, the Dawn reported, citing provisional official data. Notably, the IMF has set stringent prerequisites like raising power rates and enforcing a tax on petroleum items in order to revive the country’s halted bailout programme.