Why Didn’t The IMF Tranche Help The Economy As Expected?

It was hoped that the release of the $1.17 billion International Monetary Fund (IMF) loan would help prop up Pakistan’s crumbling economy; However, as the rupee continues its downward spiral, this has not been the case.

The economist and former Federal Finance Minister Dr. Hafeez Pasha explained that while the IMF loan was expected to help lift the rupee and bail out the economy, it did not as foreign exchange reserves did not rise as commitments made by other countries were not Fulfills. He also blamed the political crisis for contributing to the uncertainty in the market.

He also said that stability is a far-reaching dream until the country’s reserves hit the “psychological mark” of $10 million.

He said all the calculations and budget recommendations made by the federal and provincial governments, as well as all growth targets set, were based on the dollar level of Rs. 186 rupees. As he is now valued at 238 rupees everything will have to be rephrased and reconsidered.

Pasha said the flood crisis has certainly made things worse and he expects the IMF to help as they have indicated so. He believes the Asian Development Bank (ADB) and the European Union (EU) would also help to some extent, but it remains to be seen whether funds would be released by the IMF through its rapid transaction facility.

He warned that Pakistan was not yet in default and said $37 billion would be needed by the end of the year to avert an economic crisis.

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