IMF Raises Concerns Over Pakistan’s Debt Repayment Ability
The International Monetary Fund (IMF) has expressed worries about Pakistan’s ability to repay its external debt, describing the situation as “fragile.” According to the IMF, Pakistan’s external financing needs are expected to reach USD 62.6 billion over the next three years under the Extended Fund Facility (EFF) program. This requirement is projected to increase to USD 110.5 billion over a five-year period from 2024-2025 to 2028-2029.
For the current fiscal year, Pakistan’s external funding needs are estimated at USD 18.813 billion, rising to USD 20.088 billion in 2025-2026 and USD 23.714 billion in 2026-2027. Even after the three-year program ends, the financial demands will remain high, with USD 24.625 billion needed in 2027-2028 and USD 23.235 billion in 2028-2029.
The IMF has warned that Pakistan’s ability to repay debts is subject to “major risks” and depends heavily on policy implementation and timely external financing. The Fund’s exposure could reach Special Drawing Rights (SDR) 6,816 million by September 2024. High public debt, low reserves, and sociopolitical factors could threaten policy execution and debt sustainability.
Restoring fiscal and external viability is crucial for Pakistan to repay the Fund. This requires strong policy implementation, fiscal consolidation, external asset accumulation, and decisive reforms for resilient economic development. On September 25, the IMF’s Executive Board approved Pakistan’s 37-month EFF agreement, valued at around USD 7 billion.
Doubts Revealed
IMF -: IMF stands for International Monetary Fund. It is an organization that helps countries by giving them money and advice to manage their economies better.
Debt Repayment -: Debt repayment means paying back the money that a country or person has borrowed. It is important to pay back loans on time to avoid financial problems.
External Debt -: External debt is the money that a country owes to lenders outside of its own country. This can include other countries, international organizations, or foreign banks.
Fragile -: In this context, ‘fragile’ means that Pakistan’s ability to pay back its debt is weak and could easily be affected by problems.
USD -: USD stands for United States Dollar, which is the currency used in the United States. It is often used in international trade and finance.
Reserves -: Reserves are the money or assets that a country keeps to use in emergencies or to support its economy. Low reserves mean there is not much money saved for tough times.
Sociopolitical Factors -: Sociopolitical factors are the social and political issues in a country that can affect its economy, like government stability or public unrest.
Policy Implementation -: Policy implementation means putting plans or rules into action to achieve certain goals, like improving the economy.
Reforms -: Reforms are changes made to improve a system, like the economy or government, to make it work better.
EFF Agreement -: EFF stands for Extended Fund Facility. It is a type of financial help from the IMF that supports countries with economic problems over a longer period.
