Pakistan is currently trying to seek a loan for between $6 to $8 billion from the International Monetary Fund (IMF) to help pull themselves out of debt. The Finance Minister has proposed that money should also be sought in the form of a one-off tax to Pakistanis, where it’s believed that up to $12 billion could be sitting in bank accounts, which could help the country to recover. However, many Pakistanis are already financially struggling themselves due to inflation as a result of the country’s debts.
Finance Minister sheds light on the situation
Asad Umar, Pakistan’s Finance Minister, recently conducted a live session on social media in Islamabad on 3 April, where he revealed the extent of Pakistan’s financial problems. He claimed that the Islamic Republic’s basic debts are so big that it’s near having to declare itself bankrupt. The Pakistan media quoted the minister as saying, “You are going to the IMF with these massive debts in the toe for a bailout. We have had to fill big gaps.” Worryingly, Pakistan’s economic growth is set to fall a further 3.9% in the 2019 fiscal year from 5.2% that was seen in 2018, according to the Asian Development Bank who cited “macroeconomic challenges” were faced by Pakistan.
Negotiations with the International Monetary Fund
Asad Umar went on to say on social media that Pakistan has essentially been “bleeding 2 billion dollars” over the course of three months and that they were currently approaching the IMF for a bailout. Negotiations with the IMF are believed to be in the final stages with almost all issues related to a bailout package settled. The shocking amount that Pakistan is reported to seek for a loan is between $6 to $8 billion. A final agreement is expected when the IMF and World Bank hold a final session in April in Washington.
The effect on the public
The Bureau of Statistics released data on April 1st showing that Pakistan’s consumer price inflation had risen to 9.41% year-on-year, which is up from 8.21% just two months earlier in February. At the end of March, the Central Bank in Pakistan lifted their key policy rate by 50 basis points to 10.75%. They stated that this is due to continuing inflationary pressures, combined with high fiscal and current account deficits. Consumers have seen sharp inflation in the price of everyday products, including food, fuel, and other transport costs. Additionally, a one-time tax amnesty of 5-10% on any hidden wealth people may health is being backed by the government in an attempt to help Pakistan recover. What this could actually be doing is making the situation worse for Pakistanis who are already financially struggling due to inflation.
It’s unlikely the public will get any relief from inflation until after the bailout is paid by the IMF, though it could take years for prices to drop enough for it to be noticeable as Pakistan tries to stabilize their financial situation.
Author: Jenny Holt