Critical analysis of loan from IMF.docx - PAKISTAN SHOULD...

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PAKISTAN SHOULD TAKE FINANCIAL ASSISTANCEFROM IMFPakistan is all set to take another loan from International Monetary Fund (IMF).The announcement was made by Finance Minister Asad Umar, through a recordedvideo message, on 8thOctober, that the government would approach the IMFto dealwith the country's adverse economic conditions and restoring confidence amongthe investors. Support from China and Saudi Arabia has not been proved to beenough for Government as much as they anticipated, and this is likely to haveprompted the Pakistani government to decide to go to the Fund.But here arises the real question. Should Pakistan take loan form IMF or not?Over the past ten years, the International Monetary Fund (IMF) has emerged as akey player, which has greatly influenced the Pakistan’s macroeconomicspolicies. Since 1958, Pakistan has adopted IMF’s financing programs 21 times.Every new government has been forced to go to the IMF program due to thelegacy of those who help power, in the previous government.The main objective of Pakistan’s governments to take loans from IMF was tostabilize their worsening economy, exchange rates and balance of payments. IMFprovides huge amount of loan for such purposes, which seems very beneficialand attractive offer at first sight for a short term perspective but infect nothing isfree in this world. IMF provide loans in exchange of many demands andconditions which are to be fulfilled, which can be changing inmacroeconomicspolicies (fiscal and monetary), Inflation targeting policies, trade liberalizationand privatization of public-sector enterprises.This time again Pakistan is forced to enter into a IMF program because theeconomy getting worse day by day. The foreign exchange reserves held by StateBank of Pakistan had declined to $7.7 billion. The current account deficit hastouched the highest ever level of $18.9 billion. Pakistan's imports have recorded at
historic $60.9 billion during FY2018 that is a major threat to foreign exchangereserves. Meanwhile, the Pakistani rupee is continuously depreciating. Value ofUS dollar has recently surged to an all-time high of Rs133.67. The sharp rupeedepreciation has added Rs2000 billion in overall debts in last eight months.According to Finance Minster, the budget deficit is soared to 6.6 percent of theGDP (Rs2.6 trillion) during FY2018.The State Bank of Pakistan (SBP) released data showed thatPakistan's debt hasincreased to an unsustainable level of Rs25.861 trillionon June 30, 2018 againstRs25.109 trillion till June 2017, indicating that the total debt increased by Rs4.752trillion just alone in last financial year 2017-18.Pakistan’s external debt and liabilities stood at $95.097 billion on June 2018against $83.431 billion, witnessing a surge in EDL by $12 billion just in one fiscalyear 2017-18. Of total debt and liabilities of Rs29,861 billion, the governmentdomestic debt stood at Rs16415 billion, government’s external debt in rupee termRs7795 billion, debt from IMF Rs740.8 billion, external liabilities Rs622.3 billion,

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Term
Spring
Professor
Asif warsi

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