IMF Board is Expected to Approve US 1.3 Billion Loan for Pakistan Today

Today, the IMF will hold an executive meeting to approve a Pakistani loan worth US 1.3 billion at US time. It is expected that the staff-level agreement requested by the IMF will be approved by its executive directors. Pakistan is facing an external debt crisis due to mismanagement, and it has been decades since Pakistan avoided harsh reforms. If Pakistan wants to become a really debt-free country, Pakistan has to take harsh measures and make a journey towards reform. Moreover, reforms should be based on industrialization and focus on increasing exports, as Pakistan's major issue is the ratio of imports to exports. 

The ratio of imports is much larger than exports, which is the major reason why Pakistan regularly approaches the IMF to get a bailout program. Whenever the government tries to focus on growth, it always results in a massive current deficit in the Pakistani economy, and the result is that Pakistan's economy overheats and Pakistan has to take the path of stability. Additionally, this cycle has been repeated by Pakistan for more than a decade, and now it is the right time to Pakistan to focus on export-oriented growth. Pakistan also needs to make laws and beef up security measures to make Pakistan investor-friendly. Pakistan has all the features to become investor-friendly; however, it requires substantial reforms to implement them. 

It is expected that Pakistan's IMF review program will be approved and Pakistan will receive a US$1.3 billion loan by next week. However, it is advised that Pakistan must focus on reforms and avoid import-led growth, because at this time, Pakistan's external debt repayments are mainly paid by remittance inflows. However, another large current account deficit would have severe consequences for Pakistan. This could end up in major devaluation, higher taxes, inflation, and so on.