International community won’t let cash-strapped Pakistan become Sri Lanka: media report

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On July 14, the IMF confirmed that an agreement had been reached with Pakistan, which has been facing a serious economic crisis for a year, to restore a stalled lending program and also increased its size by 6 billion. dollars to $7 billion.

On July 14, the IMF confirmed that an agreement had been reached with Pakistan, which has been facing a serious economic crisis for a year, to restore a stalled lending program and also increased its size by 6 billion. dollars to $7 billion.

There is tacit coordination that the international community will not let cash-strapped Pakistan – as long as it stays the course – become Sri Lanka, a news outlet reported on July 15, days after Islamabad has signed a preliminary agreement with the International Monetary Fund (IMF) for the release of a $1.17 billion loan tranche which has been pending since the beginning of this year.

On July 14, the IMF confirmed that an agreement had been reached with Pakistan, which has been facing a serious economic crisis for a year, to restore a stalled lending program and also increased its size by 6 billion. dollars to $7 billion.

The revival of the IMF bailout is likely to help the government weather the economic crisis, as the release of loan disbursements from the fund will encourage other international financial institutions to engage with Pakistan.

According The Express Grandstand newspaper, substantive discussions with diplomatic channels revealed that the international community was supporting the IMF all the time and gave no chance to the government to back out of the talks by not extending any form of cash aid to Pakistan.

“All friends of Pakistan had asked him to work with the IMF and the international community was constantly informed by IMF staff about the progress of negotiations on the program,” the daily reported, citing diplomatic sources.

The disclosure through diplomatic channels was also confirmed by the government sources, who told the newspaper that Saudi Arabia and the United Arab Emirates had also advised Prime Minister Shehbaz Sharif to take the IMF route first.

Not receiving cash from Saudi Arabia, the United Arab Emirates and Qatar was also a surprise for the Sharif family who have historically cordial relations with the royal families of these countries.

There is tacit coordination that the international community will not let Pakistan – as long as it stays the course – become Sri Lanka, where its President Gotabaya Rajapaksa sent in his resignation after fleeing to Singapore amid mass protests against the economic collapse of his country, according to the daily said.

Government sources said this ended the chances of a popular decision despite the ruling alliance’s political capital being rapidly eroded. However, these countries have helped Pakistan stave off a default by providing billions of dollars in loans that fell due in the past six months but were extended.

The diplomatic sources said the IMF board belonging to these countries had given assurances that they would not withdraw their existing bailouts. The international community believes that Pakistan needs reforms under the IMF program even more than its money.

According to the diplomatic sources, many people would think that Pakistan found itself in a similar situation in 2018. However, they added that the situation was different this time as there was less money available in the international markets.

Cash-strapped Pakistan could face severe economic crisis amid rapid depletion of foreign exchange reserves

The IMF’s decision to give only $1.2 billion after pushing Pakistan to swallow many bitter pills also indicates that international creditors would keep Pakistan in a tight spot.

Imran Khan’s previous government had signed the 39-month loan program in July 2019 aimed at avoiding default on foreign bonds. However, the country remained in turmoil and its foreign exchange reserves remained low amid heightened external debt vulnerabilities, the newspaper said.

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