Amidst weak external sector dynamics and low FX Reserves, Pakistan has once again sought support from the International Monetary Fund (IMF), marking its 23rd lending commitment in a 76-year history. Yet, Pakistan’s situation is not unique, as it joins a group of countries facing substantial IMF debts.

Currently, Pakistan ranks fifth in terms of outstanding IMF Loans, following Argentina, Egypt, Ukraine, and Ecuador. Pakistan’s outstanding debt with IMF stands at SDR 5.35 billion equivalent to $7.07 billion at June 30, 2023.

Argentina leads the list of countries with the highest outstanding IMF credit, with a significant debt of $40.2 billion. This South American nation has a history of financial instability and has repeatedly turned to the IMF for assistance in navigating its economic challenges.

Similarly, Pakistan has a history of External imbalances and has resorted to the IMF Loans for assistance in navigating its economic challenges.

Pakistan’s history of borrowing from the International Monetary Fund (IMF) spans several decades and is marked by recurring financial challenges, economic crises, and the need for external assistance to stabilize the country’s economy. Here’s an overview of Pakistan’s borrowing history from the IMF:

  1. Early Borrowing (1980s and 1990s): Pakistan’s first significant engagement with the IMF took place in the early 1980s. The country faced severe economic difficulties, primarily stemming from external factors such as high oil prices, coupled with internal issues like fiscal mismanagement and a growing debt burden. Pakistan entered into its first Extended Fund Facility (EFF) arrangement with the IMF in 1988.
  2. Post-Nuclear Sanctions (1998): In 1998, Pakistan conducted nuclear tests, which resulted in economic sanctions from several Western countries. These sanctions exacerbated the country’s financial woes. To stabilize the economy, Pakistan sought assistance from the IMF yet again, and a new program was initiated in 2001.
  3. Global Financial Crisis (2008): The global financial crisis of 2008 had a profound impact on Pakistan’s economy. A sharp rise in global commodity prices, particularly oil, worsened the country’s trade deficit and fiscal imbalances. In 2008, Pakistan entered into another IMF program under the Stand-By Arrangement (SBA) to address these challenges.
  4. Energy Crisis and Structural Reforms (2013): Pakistan’s persistent energy crisis, characterized by power shortages and an inefficient energy sector, led to further economic stress. The IMF program initiated in 2013 aimed at implementing structural reforms, including improvements in the energy sector and fiscal consolidation.
  5. CPEC and Brief Respite (2016): Pakistan experienced a brief respite from IMF programs as it secured financial assistance from China under the China-Pakistan Economic Corridor (CPEC) initiative. This massive infrastructure project brought in substantial investments and temporarily eased Pakistan’s external financing needs.
  6. Return to IMF (2019): Pakistan’s economic challenges resurfaced, driven by a looming balance of payments crisis, dwindling foreign exchange reserves, and a large current account deficit. In May 2019, Pakistan signed a $6 billion Extended Fund Facility (EFF) agreement with the IMF. The program aimed to address fiscal imbalances, improve economic stability, and implement structural reforms.
  7. COVID-19 Pandemic (2020): The COVID-19 pandemic further strained Pakistan’s economy, leading to reduced economic growth, increased healthcare spending, and a decline in remittances. The IMF disbursed additional funds under the existing program to help Pakistan mitigate the pandemic’s impact.

Pakistan’s history of borrowing from the IMF reflects the country’s recurring economic challenges and the need for external financial support to stabilize its economy, implement structural reforms, and improve fiscal management. While IMF programs have provided temporary relief, Pakistan continues to grapple with long-term issues such as fiscal deficits, energy shortages, and structural inefficiencies in various sectors. The country’s future economic stability will likely depend on its ability to address these underlying challenges effectively.

Stand-By Arrangement (2023): A$3 billion Pakistan’s’ economic reform program aimed to support immediate efforts to stabilize the economy and guard against shocks.

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