Pakistan China IMF: Pakistan finally got a loan of $3 billion from the International Monetary Fund (IMF) after circling for several months. With this, the risk of default over Pakistan has been averted. Pakistan was told to get a loan from the IMF on June 30, when its agreement with the IMF on the bailout package ended.
After receiving a $3 billion loan from the IMF, Pakistan Prime Minister Shehbaz Sharif has thanked China for helping the cash-strapped country. Shehbaz Sharif said, “China has saved Pakistan from default during this period.”
‘China Saved Pakistan’
On June 30, the IMF announced that hours before the deadline on the bailout package with Pakistan reached a staff-level agreement on a US$3 billion stand-by agreement. The funds from the IMF will provide some relief to Pakistan, which is grappling with a severe balance of payments crisis and depleting foreign exchange reserves.
However, experts say that with this loan of $3 billion, Pakistan can live comfortably for a few months, and after that, almost all the ways to avoid default will be closed for it.
$4 billion has already been released to Pakistan from the IMF fund.
An IMF team led by Nathan Porter held in-person and virtual meetings with Pakistani officials to discuss a new financing partnership for Pakistan under the IMF Stand-by Arrangement (SBA).
What A Big Relief To Pakistan
This agreement with the IMF is a big relief for Pakistan, although this relief is only for a few months. For the time being, dollars have entered Pakistan’s foreign exchange reserves.
In a statement released today, the IMF has said that Pakistan’s economy has faced several shocks, such as devastating floods in 2022 and the Ukraine war, which has affected the lives of millions of Pakistanis and has led to a significant increase in inflation in Pakistan.
Apart from this, some policy steps of the Government of Pakistan have also hurt the forex reserves. The country’s economic development has reached a standstill, and the prices of essential commodities have increased considerably. Despite the efforts of the authorities to reduce imports and trade deficits, foreign exchange reserves have fallen to very low levels.
What is Stand-by Arrangement?
Let us tell you that Pakistan and IMF have reached this agreement under Stand-by Arrangement.
The Stand-by Arrangement (SBA) provides short-term financial assistance to countries facing balance of payments problems. Pakistan had to pay the foreign debt immediately; if it could not, it would have defaulted.
Therefore, Pakistan sought a loan from the IMF last week under a stand-by arrangement.
In the last few years, the trend of SBA has increased a lot, and IMF has also used it to make the countries in crisis more and more responsible and accountable for their economy so that they can come out of the economic crisis.
