IMF money will stop the country’s default risk, but it won’t end the economic catastrophe

After months of intense talks, an IMF agreement was reached (IMF). This boosts our economy. IMF will provide Pakistan $1.17 billion.
This amount will stop the country’s default risk, but it won’t end the economic catastrophe. This weak regime needs the IMF programme revived, but it hasn’t been simple.
Pakistan endured economic downturn like other developing countries. In this aspect, Pakistan was vulnerable. The country wasn’t doomed, but it was near. The IMF deal stabilised the economy. The newest IMF loan is $6 billion.
2019 marked Pakistan’s IMF debut. With half of the IMF money, the previous government struggled to meet its goals. Few days before Imran Khan’s government left, a large subsidy wrecked economic stabilisation attempts. Imran Khan was facing a no-confidence motion when he received this subsidy.
This popular choice couldn’t save the Pakistan Tehreek-e-Insaf (PTI) government, but it strained the country’s reserves and caused the biggest economic catastrophe. The new government negotiated stringent terms with the IMF. Before IMF permission, the government took harsh economic measures. Perhaps the IMF’s toughest demands on Pakistan.
As a result, oil prices rose and subsidies were cut. The government needs $436 billion in tax aid. The initiatives will hurt the already fragile ruling coalition.
Although Pakistan and the IMF Staff Mission agreed to renew the programme in June, the IMF Board of Directors approved it two months later.
The IMF accepted a review to prolong the loan and raise it by Rs 72 crore to $7 billion. Pakistan aims to receive financial aid from friendly countries and the World Bank after IMF clearance.

This is fantastic news, but the country’s economic condition is still unstable. The severe rains and floods have affected 33 million people. Our population is 15% Hispanic. This is Pakistan’s worst disaster ever. In these circumstances, achieving economic stability will be difficult.

Millions have been displaced. Floods have damaged jobs, crops, and cattle on thousands of acres. Broken roads and dams undermine infrastructure. More flooding is expected.

It’s too soon to estimate the disaster’s economic damage. The government anticipates that reconstruction will cost over 10 billion rupees. A weak economy can’t afford this loss. Losing thousands of acres of standing crops could lead to food shortages in the future. In this circumstance, the government will struggle to control the 40% inflation.
In current situations, implementing IMF terms will be difficult. The ruling coalition and the opposition are pressuring the government to restore subsidies on petroleum products and power rates, both important IMF programme provisions.

With PTI in power in Punjab and Khyber Pakhtunkhwa, the federal government can’t take severe actions. The PTI tried to derail the IMF pact through its provincial governments. Leaked phone calls of former finance minister Shaukat Tareen with Khyber Pakhtunkhwa and Punjab finance ministers have stoked claims of PTI efforts to derail the IMF pact.

PTI hasn’t stopped the IMF episode, but it can still cause problems for the administration. PTI leaders have opposed the IMF accord, although it’s a continuation of Imran Khan’s programme from 2019. Non-implementation of the deal by the previous government destabilised the economy.
This is why the IMF tightened its terms. Due to a weak economy, the administration had to accept onerous terms. Oil prices and the removal of subsidies have hurt people, but the economy has been spared.

The new government faces a strong opposition, making controversial decisions difficult. Senior party leaders criticised Finance Minister Miftah Ismail. It illustrates the Pakistan Muslim League (N) and Sharif family power struggle. Miftah Ismail closed the sale, but the story isn’t done yet.

The IMF accord has helped, but the country has many obstacles. Still in danger after leaving ICU. Increasing political instability hinders economic recovery.