RECENTLY, on 29 June 2023 Pakistan signed a staff level agreement with the IMF for a $3 billion bailout package. It is quite a good sign for the downing economy of Pakistan at this moment, where Pakistan was at the verge of default. If we go back to the history of Pakistan’s economy, it is very much dependent on the foreign loans. Pakistan first approached the IMF in 1958 for the bailout and till now Pakistan has been borrowing the loans from IMF. In 65 years, Pakistan has almost taken 23 bailout packages from the IMF which shows the acute dependency of Pakistan on foreign loans.
Previous government of PTI, announced at the time of elections not going to the IMF, and it will break the begging bowl and will make the country able to stand on its own feet. But all these claims were unreal. The PTI-led government also went to the IMF for a loan which showed that now it has become very difficult for Pakistan to get out from loan traps. Pakistan is paying 60% of revenue collected to the payment of debts.
The only positive effect of these IMF bailout is short lived stability of the country’s economy. If Pakistan utilises the billions of dollars received in the form of remittances and prevents the smuggling of dollars to Afghanistan and other countries, we need not to knock the doors and beg for the loan.
Pakistan, since its birth, has badly failed to produce much needed effective economists due to which our financial policies are ineffective and not taking the country out of crisis. Debts have weakened the structure of Pakistan. Pakistan is unable to provide jobs and other facilities to its people. Government spends 60% of revenue in payment of debt which renders the other development projects in the country. Today the country’s debt to GDP ratio has risen to 80% which is likely to be increased to 100% in a couple of years.
Developed countries such as South Korea, the United Kingdom and Japan have a strong economy and are still growing. These countries also faced economic and financial shocks but didn’t beg from any country and passed the stable economy to its next generation and prevented them from the burden of financial debt.
A country with a debt ridden economy cannot stand on its feet. It is unable to safeguard and provide necessities to the nation. Due to dependency on the IMF, Pakistan also has lost its status on the world stage which brings dire consequences to the nation. Today the world does not pay any heed to Pakistan’s claim of atrocities in Kashmir by India because India is the 6th largest economy in the world.
Sovereignty is the key element for any independent state, but countries with debt ridden economies have to compromise on their sovereignty. In Pakistan we had witnessed American drones and the intervention of the IMF in countries internal policies. The IMF set down the conditions which are to be fulfilled by Pakistan in order to get the bailout package.
In short, one cannot deny the fact that Pakistan is on the edge of an economic crisis. But, there is still a light at the end of the tunnel for Pakistan. But it is important to keep in mind that the struggling economy of Pakistan may not rise in the near future
—The writer is contributing columnist, based in Karachi.
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