Pakistan continues borrowing from International Money launderers

BY KASWAR KLASRA

ISLAMABAD: Soon after securing emergency loan of $1.4 billion from IMF, government of Pakistan has proposed remarkable increase in pay and pension of government employees including armed forces.

Sources told Islamabad telegraph that 10-15 % raise in pay and pension of government employees and pensioners has been proposed.

In April this year, The International Monetary Fund (IMF) approved an emergency loan of $1.4 billion for Pakistan, as Islamabad is also expected to get around $1.5 billion relief in the shape of delay in repayment of loans to bilateral creditors.

It is interesting to note that Pakistan is not among the nations whose debts will be written off by the rich nations and multilateral institutions. But it has been offered both, cheap financing by the multilateral creditors and debt rollover by the bilateral creditors.

“The IMF Executive Board approved a purchase of Pakistan under the Rapid Financing Instrument (RFI) equivalent to $1.386 billion (50 per cent of quota) to meet the urgent balance of payment needs stemming from the outbreak of the Covid-19 pandemic,” says a statement issued by the global lender in April..

Last year, Pakistan and the International Monetary Fund (IMF) reached a new agreement securing a US$6 billion bailout package, in a move that came as China on Monday gave a US$2.2 billion loan to the cash-strapped nation. The agreement came after months of painstaking negotiations between the two sides and marks Pakistan’s 22nd bailout with the IMF.

“The programme aims to support the authorities’ strategy for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending,” said Ramirez Rigo, head of the IMF delegation, in a statement.

According to Pakistan’s finance adviser, the country is set to receive US$6 billion from the IMF in addition to US$2 to US$3 billion from the World Bank and Asian Development Bank over the next three years.

The bailout came as Pakistan received a US$2.2 billion loan from China on Monday. The State Bank of Pakistan has received 15 billion yuan last yearas proceeds of the loan obtained by the government of Pakistan from China.

Pakistan has been struggling to stave off a looming balance-of-payments crisis while its economy teeters due to low growth, soaring inflation, and mounting debt.

Analysts have warned that any fresh IMF deal would likely come with myriad restrictions that could hobble Prime Minister Imran Khan’s grand promises to build an Islamic welfare state, as the country is forced to tighten its purse strings.

Economist Ashfaq Hassan Khan, from the National University of Science and Technology, was critical of the bailout package, calling it a “drop in the ocean”.

“US$6 billion in next three years means US$2 billion per year. Pakistan could have managed this amount easily by promoting its exports. Reaching out to IMF for US$6 billion is not justifiable any way,” Hassan said, adding that the loan would increase poverty in the country. Political scientist Farrukh Saleem said the bailout amount was not of importance.

“What is most important for Pakistan is that it will get a ‘letter of confidence’ from the IMF. This letter will make it easy for Pakistan to borrow even more from the World Bank, Asian Development Bank and borrow Eurobonds,” Saleem said. He noted it was not up to Pakistan to decide on loan amounts, which differ from country to country.

“Pakistan’s normal quota exceeds US$6 billion, which it managed to get,” Saleem said. Pakistan has had 21 other bailouts since it joined the IMF in 1950. Its most recent loan was issued in 2013, worth US$6.6 billion.

The United Arab Emirates – Pakistan’s largest trading partner in the Middle East and a major investment source – recently offered US$3 billion to support the battered economy.

Islamabad also secured US$6 billion in funding from Saudi Arabia and struck a 12-month deal for a cash lifeline during Khan’s visit to the kingdom in October. However the influx of Gulf cash failed to reverse the economic headwinds battering Pakistan, as high fuel prices, low tax yields, and rising inflation have kept the country off balance.

The deal with the IMF comes weeks after Shaikh – a former World Bank official who was Pakistan’s finance minister from 2010 to 2013 – was appointed as “adviser on finance” following Finance Minister Asad Umar’s resignation amid a wide-ranging cabin reshuffle.

The abrupt departure of Umar – one of Khan’s most powerful ministers – was particularly shocking due to his perceived role in overseeing the vital negotiations with the IMF over the long-delayed bailout.

The announcement comes as discontent is already growing over measures Khan’s government has taken to fend off the crisis, including devaluing the rupee by some 30 per cent since January 2018, sending inflation to five-year highs.

A government report published last year also noted that Pakistan’s growth rate is set to hit an eight-year low, with the country’s GDP rate likely to sink to 3.3 per cent against a projected target of 6.2 per cent.

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