In order to meet the condition set by the IMF, Pakistan has agreed to increase the policy interest rate by 2%, or 200 basis points, which now stands at 19%.
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This decision comes in the wake of Pakistan fulfilling another IMF pre-condition for the release of USD 1.1 billion out of the USD 6.5 billion bailout package. This bailout will give Pakistan some time to resolve its unprecedented economic crisis.
The decision came after a virtual meeting that took place between the IMF review mission and Islamabad, which informed the Pakistan Finance Ministry.
Pakistan’s economy is looming, people are living at the bare minimum, and political leadership is unreliable. Economists predict Pakistan’s future to be worrisome as the country stares at bankruptcy.
Amid IMF aid uncertainty, Pakistan’s currency tumbled to 262 against the dollar. If the IMF bails out Pakistan, this will be the sixth time when Pakistan will get some relief and some more time to sustain its economy.
Image Source- CNN
Pakistan’s unending economic crisis
Economists highlight various issues that have contributed to Pakistan’s economic meltdown.
Firstly, Pakistan’s budget is ‘publicist’ in nature, which means political parties, in an effort to capture votes, give ‘freebies’ to the public. The money that should be used for the infrastructural development of the country goes to waste on peculiar things.
Secondly, Pakistan is spending more of its budget on defence than in any other sector. The country is infamous for funding terrorist activities and providing safe havens to terrorists. Now, this is backfiring, the bomb blast in Peshawar, the capital of Pakistan’s Khyber Pakhtunkhwa province, took the lives of more than 100 people who were worshipping at a police compound mosque. The responsibility for the attack was taken by TTP (Tehreek E Taliban Pakistan) which is an umbrella organisation of armed militant groups operating along the Afghan–Pakistan border who aim to do the same thing to Pakistan as the Taliban did to Afghanistan.
Image Source – The Hindu
Furthermore, Pakistan has lost its autonomy by being completely under the influence of China, so much so that Pakistan is now being called the ‘adopted child’ of China. The pseudo-infrastructural projects constructed in Pakistan have trapped Pakistan in China’s ‘debt trap policy’. The China-Pakistan Economic Corridor (CPEC) is one of the promising projects that China is constructing in Pakistan.
Image Source- Daily Pakistan
Way out
Experts say that the solution to ending the economic woes of Pakistan lies within the country itself. The IMF, or for that matter, China, cannot eliminate its economic crisis. Pakistan needs to adopt innovative measures, gather people’s confidence, and focus on creating a good education system and robust health infrastructure that will create healthy and educated individuals who can contribute to the country’s GDP and thus improve the shape of the economy.
Pakistan needs to demonstrate that its system is transparent. Pakistan is in dire need of a strong government that is open and accountable to its citizens. The people of Pakistan should raise their concerns and demands and ask the government to make policies keeping growth and development in mind.
Countries should focus on building their economies resilient. Money should be spent on building human resources rather than building military capabilities. Better understanding local interests, promoting good governance, strengthening civil society, people-to-people cooperation, innovation, and technology capacity can surely bring positive changes.