The signing up of IMFs staff-level agreement has opened the doors for the suppressed economic condition of Pakistan with special reference to the imports which have been causing the closure of industry in the country.
Other advantages of $3 billion loans of nine months duration include opening the door for other sources of getting loans from international donors and friends countries and revival of economic activities. Despite it, the international rating agencies have warning that the Pakistan has to make $25 billion debt repayment in the fiscal year that has just started.
Krisjanis Krustins, the director of sovereigns for APAC at Fitch commented to Bloomberg, Pakistan will require significant additional financing besides the IMF disbursements to meet its maturities and finance an economic recovery. While the IMF likely sough and received assurances for such financing, there is a risk that this could prove insufficient, particularly if current account deficit widen again.
International Monetary Fund had put certain conditions on Pakistan before signing the agreement which include increasing the taxes, cutting the expenditures and raise the primary interest rate.
Although different quarters in Pakistan are applauding the staff-level signing of agreement yet the final stage of the approval by the Executive Board of international donor has not been given so far.
Grace Lim, an analyst at Moddys in Singapore told Bloomberg, It is uncertain that the Pakistani government will be able to secure full $3 billion of IMF financing during the nine-month stand-by arrangement program.
Pakistans PDM government is bound to fulfill the requirements of IMF which may harm its political image particularly at the time the general election are likely to take place on October this year. Earlier, Pakistan had secured $1.1 billion loan in August which was stopped due to governments failure to go by certain stipulated conditions. ????