Pakistan has failed to unlock $1.1bn in funds from the International Monetary Fund (IMF) following 10 days of discussions aimed at preventing the country from going bankrupt. The move comes amid fears for the economy in a key election year, while an annual inflation rate of over 27% in January and a plummeting rupee have led to factories suspending operations because they are unable to access dollars for imports.
The country’s foreign exchange reserves are running low, providing enough dollars for only a month of imports, and there are concerns about the country’s ability to pay foreign debt. The IMF and Pakistan are said to be continuing virtual discussions, with the IMF requesting action and commitments before lending further money.
Pakistan’s finance minister claimed the country had been given a “detailed roadmap” by the IMF during the discussions and talked of “painful but necessary” reforms. The IMF is pushing for the country to make reforms and commitments before it is able to receive further lending.
Analysts have said that the government had been artificially holding the exchange rate high, contributing to the lack of dollars in the system. While the dropping of the exchange rate could help some businesses, it is also expected to push up prices. Goods from food to medicine are currently stuck in Karachi’s ports, with businesses across the country slowing or suspending work while they wait for imports.
Pakistan’s economic problems have worsened in recent years. The country secured a $6bn bailout package from the IMF in 2019, aimed at restoring economic stability. However, the IMF suspended the scheme last year due to a lack of action and implementation of reforms.
The country has since struggled to attract foreign investment. Inflation, food prices and unemployment levels have all risen in the past year, with the government recently agreeing to a $500m loan from Saudi Arabia to help the country meet its financial obligations. The IMF’s support is considered crucial to Pakistan’s economic recovery, however, the latest discussions have failed to result in immediate funding.
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