IMF and Pakistan’s economy

This article is written by Aimen Jamil, student of National University of Modern Languages. She is interested in foreign affairs, global and regional politics. 


The negotiations between IMF and Pakistan were taking place since many months but no results were finalized because of the tough demands of IMF. Now a staff level agreement has been signed between Pakistan and IMF in which we will not be getting any funds from IMF, we will be receiving only $1Bn in January, 2022. Because IMF puts its demands first. In 2019 IMF revives $6Bn bailout for Pakistan’s economy initiated by Assad Umar. It’s a program of $6Bn for which we will be receiving $1Bn in January, 2022 which will be the third tranche of IMF according to this calculation half of the IMF program will be completed.

The Scary Conditions of IMF

The finance Minister of Pakistan Shaukat Tarin explains the conditions of IMF in his press conference. One of the most scary condition of IMF is that petroleum levy will be increased by 4 rupees per litre each month. According to the conditions there should be increase of 30 rupees in petroleum prices out of which 10 rupees have already increased, and the remaining 20 will be increase in parts, increase of 4 rupees every month. Currently, the petroleum price is 147 rupees per litre which is expected to be increase to 167 rupees.

Government of Pakistan have to increase the electricity rates. Already rupees 2.97 per unit rise has been made in power tariff to salvage IMF package. The third painful decision the government have to make is to increase the taxes with the help of FBR.

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According to the budget of 2021-22 the little subsidy which was given to the public will be vanished according to the IMF’s conditions. IMF wants more and more collection of taxes. According to the budget 2021-22 the target of tax collection was 5.8 trillion rupees, IMF ask to increase the tax collection up to 6.1 trillion rupees. It want the collection of 800Bn rupees in any case.

To achieve this target Pakistan has made certain plans. 300Bn directly in the form of taxes through FBR, 350Bn leverage which was given to public in general sales tax (GST) will be withdrawn and the Public Sector Development Program would be cut by 200Bn or 22% and the contingency grants will also be reduced by 50Bn rupees.

For this purpose government has to launch another mini budget according to the conditions of IMF.

Issue of State Bank Autonomy

Another controversial demand of IMF was that the State Bank of Pakistan should be given an autonomy. According to IMF the State Bank should make the monetary policy independently without any interference from the government. The debt policy of Pakistan has brought us to the brink.

In any emergency situation government use State Bank unnecessary and the political parties use the state’s money to achieve their political ambitions. According to IMF this condition will be beneficial for Pakistan in long run. Their concerns are genuine they want their repayments for which they are imposing such tough conditions on us and we have no choice rather than accepting it.

The Storm of Inflation

According to the above mentioned conditions it is quite visible that there will be increase in inflation. Already Pakistan’s annual inflation rises to 9.2% in October, 2021 as global commodity prices spike. Due to COVID crisis the global supply chain chaos is already hitting global growth and is expected to be worse.

COVID has affected the supply and demand of the world not only in Pakistan. Germany, Canada and America and all the developed economies are facing the hardest economic crisis than ever before and the issue of currency depreciation is not only related to Pakistan the entire world is in its grip.

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After COVID there is increase in global oil prices, gas crisis, labour shortage and supply chain chaos. Biden made special arrangements to address global supply chain issue at G-20 summit.

Due to the global situation the economic activity is also affected Pakistan’s central bank predicts 5% growth for the economy despite alarming situation of inflation.

What’s next in economy?

There is no easy way for Pakistan to come out of these crisis. The major concerns for the economy is that our exports are not increasing. If we look into the past former president of Pakistan Asif Ali Zardari left the exports at $24Bn. Former Prime Minister Nawaz Sharif left the exports at $22Bn.

According to the reports of last year PTI took the exports to $26-27Bn but no considerable progress have been observed. During July-October 2021 period Pakistan’s export grew by 25% to 9.4 billion rupees compared to 7.5 billion rupees during the same period last year the target for July-October 2021 was 8.9 billion rupees


Remittances are coming in Pakistan which are directly benefitting the economy and our agriculture, construction, export and IT sector are enjoying growth.


Now the fear is that the growth in these sectors can be slowed down because of the tough policies of IMF. Rising current account deficit and the imbalance of imports and exports are posing threat to the economy. Now the government is imposing more duties on the imports in order to decrease the demand of imported products. In order to create balance in exports and imports.


The foreign investments are not coming to Pakistan which is also a curse for the developing country. These IMF conditions and the inflation are causing negative impact on the little progress of the country. A little relieve can only be given to the public if there is decrease of prices in the global market.


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