Pakistan Financial Crisis: IMF imposed conditions, Pakistan trapped in China’s debt trap, know how Jinnah’s country is on the verge of collapse – pakistan and its economy is on brink because of chinese interest and imf conditions
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Suspense continues from November
Pakistan’s IMF program has been suspended since November last year. Finance Minister Ishaq Dar refused to accept the conditions of the IMF which were necessary for the loan. At the same time, Dar expressed his inability to implement market-determined exchange rates and measures to reduce fiscal deficit. In the current fiscal year, Pakistan’s budget had set a revenue target of Rs 7.4 trillion. Of this, 52 percent was for debt repayment and 33 percent for defense and pension. In such a situation, Pakistan had very few options that it could reduce the deficit.
The government is planning to implement additional taxes worth Rs 200 billion. But the main concern of the IMF is the fiscal deficit. This deficit can reach the figure of 6.5 per cent of the total GDP. The income from taxes in the country is very less and the debt is reaching the sky. In such a situation, there was little doubt that the IMF would listen to Pakistan.
Flood increased difficulties
Due to the floods in Pakistan last year, the crisis on the economy further deepened. Due to this flood, the economy lost about 30 billion dollars. International donors have announced to give nine billion dollars to the country. The country’s foreign exchange reserves have reached $3.2 billion. This figure is quite alarming and is only for three weeks of imports. Even if the IMF reaches an agreement with Pakistan, it will take time to get the money.
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Waiting since 2019
Pakistan has currently requested for $6.5 billion. The IMF program was launched in the year 2019 and was extended till June 2023 last year. Pakistan has already received $3.9 billion. Pakistan has received some financial help from China, Saudi Arabia and UAE. Including deposits and credits, this assistance has reached $10 billion. Last month, Pakistan received three billion dollars in aid from the UAE and because of this it was saved from poverty. Saudi Arabia has given one billion dollars in aid to Pakistan. This amount is not even enough to meet one month’s oil import.
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There is an atmosphere of chaos in the country. From the wheat crisis to the shortage of electricity and petrol. Pakistan had increased power production under China’s CPEC corridor. But this production is coming at the cost of guarantees from Chinese Independent Power Producers (IPPs) and repayment of costly foreign loans. Pakistan has not yet been able to make any payment to the IPP.
China’s debt trap
Because of this, the debt on the power sector has reached $8.5 billion. China is the country which has given maximum loan to Pakistan. China has a total debt of $30 billion on Pakistan. This is 30 percent of the country’s total debt. Pakistan is currently stuck between Chinese interest rates and IMF demands. Now it has to be seen who comes forward to help first.
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