IMF to review $6 billion Pakistan loan program
The International Monetary Fund (IMF)’s review of a $6 billion loan program to Pakistan, which was scheduled for today, will now take place on February 2nd.
Originally scheduled for mid-January, but delayed at Pakistan’s request, a successful IMF review would give Pakistan immediate access to $1 billion in aid.
The IMF’s demands for fiscal reforms have enraged opposition parties, who accuse the government of surrendering the country’s economic sovereignty to foreigners. Pakistan’s senate is narrowly controlled by the opposition, who have repeatedly delayed the passage of government legislation. Pakistan’s Consumer Price Index hit 11.5% in December, with average inflation rising to 9.32%, driven by price increases in oil and food products.
Expect the IMF to approve the program if Pakistan’s parliament passes the reforms, as this ensures the government’s commitments will be implemented. The first aid tranche will likely be spent on financing imports or servicing foreign debt to prevent the Pakistani rupee from depreciating. If inflation continues to rise, expect the IMF to demand more austerity measures to unlock the next aid tranche. If the reforms are maintained in the coming years, expect increased long-term growth as investor confidence increases and Pakistan’s economy stabilizes.
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