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How Friendly Countries Helped Pakistan Secure IMF Relaxation: A Critical Analysis

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Adviser to Prime Minister on Political Affairs Rana Sanaullah delivered a crucial statement on Monday regarding the significant role played by friendly nations in helping Islamabad secure relaxed conditions from the International Monetary Fund (IMF). Speaking at a press conference in Faisalabad, Sanaullah attributed the credit for the eased conditions to the support received from friendly countries, as highlighted by Prime Minister Shehbaz Sharif.

Specifically, Sanaullah emphasized the contributions of China, Saudi Arabia, and the UAE, referring to their assistance as a form of “hand-holding” to prevent the recurrence of previous financial challenges. This reassurance comes in the wake of substantial agreements between Pakistan, KSA, and the UAE, with PM Shehbaz emphasizing a focus on investment rather than seeking loans to bolster the economy.

Reflecting on the past tenure of the PDM-led coalition government, which lasted from April 2022 to August 2023, it is evident that stringent measures were implemented, such as a surge in petrol prices and increased power and gas tariffs, in order to secure a bailout. However, these actions led to soaring inflation rates.

Sanaullah highlighted that during the PDM’s governance, the IMF’s conditions were more stringent but expressed optimism that this time around, the conditions would be more favourable under Shehbaz’s leadership.

As the current government, under Shehbaz’s leadership, endeavours to procure another IMF bailout, it is actively pursuing strategies to secure a longer program from the lender. Experts have suggested that the government’s proposed measures to raise taxes in the 2024-25 budget and enhance state revenues could potentially garner IMF approval for a loan, albeit at the risk of provoking public discontent.

The government, led by PML-N, has set an ambitious tax revenue target of Rs13 trillion for the upcoming fiscal year, signifying a nearly 40% increase from the current year, along with a substantial reduction in the fiscal deficit to 5.9% of the GDP. These fiscal adjustments are part of the negotiations with the IMF, which aims to extend a loan ranging from $6 to 8 billion to prevent an impending debt default in an economy experiencing sluggish growth within the region.

Miftah Ismail, the former finance minister recognized for successfully negotiating the revival of the last Extended Fund Facility (EFF) programme in 2022, expressed confidence that the budget if passed in its current form, is adequate to secure an IMF program. However, the anticipation of potential public backlash looms over the government’s proposed fiscal directives.

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