Squeezed between IMF demands and Chinese interests, Pakistan is on the brink of collapse

An immediate and large bailout can come to its rescue. Otherwise, it could be headed towards what Sri Lanka experienced last year

The country’s official foreign exchange reserves have dropped to a dangerous level of just $3.2 billion, equivalent to less than three weeks of imports.

An IMF mission is currently in Pakistan to negotiate a bailout of the world’s fifth-most populous country that has an unenviable record of going to the IMF 23 times since 1958 — the most by any country during this period. The negotiations could be the toughest Pakistan has ever had with the IMF. Islamabad has reportedly sought Washington’s help in securing softer conditions but was advised to resume to talks with the IMF

The IMF’s programme was practically in suspension since November last year, mainly due to Finance Minister Ishaq Dar’s refusal to meet the IMF demands to stick to a market-determined exchange rate and take measures to reduce the growing fiscal deficit. Pakistan’s current year budget has a revenue target of Rs 7.4 trillion, 52 per cent of which was allocated to servicing the debts and 33 per cent to defence, including pensions. Hence, Pakistan has little fiscal space with a total debt-to-GDP ratio of around 90 per cent.

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