Why Pakistan Needs Yet Another IMF Bailout
When Imram Khan took office in 2018, Pakistan’s economy was already in crisis.
Photographer: Farooq Naeem/AFP via Getty Images
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, inflation is rocketing, reserves are falling and the currency has been devalued multiple times. After lengthy negotiations, Prime Minister Imran Khan’s government is poised to receive the country’s 13th bailout in the last three decades.
In 2013, then-Prime Minister 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 its pledges to broaden the tax base or privatize money-losing state-owned companies. 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 in 2017 as higher oil prices and the boom in growth -- along with billions of dollars in Chinese infrastructure investment -- pushed up demand for imports. The current-account gap started to widen and reserves fell, triggering a 20% slump in the nation’s currency last year and pushing the benchmark KSE-100 Index of stocks to around three-year lows.