The International Monetary Fund (IMF) is expected to impose revenue-raising measures as a condition for releasing the next installment of aid to the crisis-stricken country of Pakistan. Moody’s Investors Service has stated that these demands are likely to be made before the IMF releases the next tranche of assistance.
Virtual talks between Pakistan and the global lender are set to begin in the coming week, following ten days of talks in Islamabad that failed to result in a deal. Pakistan is hoping to receive at least $1.1 billion in frozen funding.
Moody’s has also noted that Pakistan’s external position is under significant stress, with elevated risks to the government’s liquidity and external vulnerability. The credit rating company states that there remains considerable risks around Pakistan’s ability to secure the financing it needs to fully meet its needs in the coming years.
The IMF, in a statement, has noted that progress has been made in addressing policy measures for domestic and external imbalances, but there is still no certainty on when or if the IMF financing will be provided. The financing from the IMF, which is likely to attract funding from other sources, is seen as crucial to alleviate Pakistan’s liquidity stresses. The country’s economy is struggling with a balance-of-payments crisis, high levels of external debt, political chaos, and deteriorating security. The IMF is demanding that Pakistan boost its low tax base, end tax exemptions for the export sector, and raise artificially low prices for petrol, electricity, and gas. The government has called the conditions for the $1.2 billion loan installment “beyond imagination.” The central bank reported that foreign exchange reserves have fallen by $170 million in a week, standing at just $2.9 billion as of last Friday.
The country’s declining economy has sparked fears of unemployment in the construction industry. The IMF’s cash injection will provide temporary relief, but more reforms are needed at the government level. Despite previous failures, the government hopes that the IMF funding will boost confidence and encourage further loans from friendly nations such as Saudi Arabia, China, and the UAE.
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