IMF deal in jeopardy, only China can bailout Pakistan: Report
2 min read 14 Mar 2023, 10:33 AM ISTPakistan has implemented a series of policy measures including increased taxes, higher energy prices, and increasing interest rates to the highest in 25 years to unlock the IMF funding.
PremiumA US bank said that China can rescue crisis-hit Pakistan because of its close ties with the country, while the International Monetary Fund (IMF) and Pakistan are still in tough negotiations on financial aid for economic recovery, according to a report by Dawn news.
“As China and Pakistan have close ties, the hope is rising for China to provide a backstop to its long-term ally. China holds the relief key in the near future as it is the largest creditor," the Bank of America said, adding that Pakistan will need to pause debt repayments if it isn’t able to secure funding from IMF quickly enough.
A team of economists including Kathleen Oh wrote that unless the payout comes through soon, a state of moratorium looks unavoidable. “Whether and when Pakistan can receive the next installment from the IMF is still up in the air."
Pakistan, the country which is struggling with its worst economic crisis in decades, has implemented a series of policy measures including increased taxes, higher energy prices, and increasing interest rates to the highest in 25 years to unlock funding from its stalled IMF $6.5 billion loan program.
Finance Secretary Hamed Yaqoob Sheikh last week said that an agreement was likely in the next few days, though Pakistan has missed such timelines in the past.
China comes to Pakistan's rescue amid financial collapse
Pakistan's external foreign debt amounts to $126 billion, out of which $30 billion is held by China, according to the International Monetary Fund (IMF) data. This amount is three times larger than Pakistan's IMF debt of $7.8 billion and exceeds its borrowings from the World Bank and Asian Development Bank altogether.
The Industrial and Commercial Bank of China has approved the rollover of a $1.3 billion loan to Pakistan. This is in addition to the $700 billion that the bank had previously lent to the country.
IMF eases rules for members but no help for Pak yet
While the International Monetary Fund (IMF) will temporarily increase funding limits for member nations to help them overcome current financial challenges, at the same time, it is still locked over an unfinished loan program required for the ongoing economic crisis.
Under the fund’s General Resources Account, the annual limit will be raised to 200% of the quota for a period of 12 months from the current 145%, the financial agency said in an official statement.
The changes will provide member countries— access to funds without triggering the so-called exceptional access framework that entails tougher conditions. The measure follows its permission last month to five development lenders to use its reserves to help poor nations.
