Why Pakistan Is on the Road to Another IMF Bailout

Pakistan’s economy is going through a familiar boom-and-bust cycle that sees it back at the door of the International Monetary Fund. Debt is soaring, the current-account deficit is widening, reserves are falling and the currency has been devalued multiple times since December. Imran Khan’s new government has put together a team to meet with the IMF about yet another aid package, with his finance minister Asad Umar leading negotiations.

Twelve since the late 1980s. Most recently, in 2013, the government of Nawaz Sharif agreed to terms for an IMF loan of $6.6 billion disbursed over 36 months. During that time, the government mostly fell short of broadening the tax base or privatizing money-losing state-owned companies, as the IMF had hoped. Nevertheless, the economy rebounded after the IMF program, with growth accelerating, stocks soaring, the currency stabilizing and foreign-exchange reserves tripling to a record. All of that came undone last year as higher oil prices and the growth boom pushed up demand for imports, the current-account gap widened and reserves started to slide.