An important personality from Pakistan who I met recently on the sidelines of an event was quite convinced that a minimum $10 billion bailout package from the International Monetary Fund (IMF) was something the country would have to seek to remain above water. Even with Pakistan’s looming economic crisis well before the recent elections, the issue has been spoken of quite casually in most post-election analyses.
That Prime Minister Imran Khan has his hands full with the economic crisis also appeared to be treated rather casually by Pakistan’s high society, ostensibly due to the issue of national self-esteem being involved. Across the border, they can see India signing a $5 billion deal to acquire just one weapon system (the S-400 from Russia).
It must be galling for Pakistani citizens to compare their situation to India’s: Especially since, only a couple of generations ago, Indian citizens rued the Pakistani quality of life and consumerism even as India underwent the tribulations of a socialist economy.
On 9 October, 2018, Imran finally decided to open negotiations with the IMF for a bailout package; the 13th time Pakistan is seeking such a loan. There are strategic opportunities for the international community and perhaps India too. However, first let’s take a quick look at the situation:
All indicators suggest a downturn in economic growth and increase in inflation. The forecast for growth is between 4.8 percent and 5.1 percent, with inflation in double digits. It took seven meetings of the nation’s highest economic affairs body to finally increase fuel prices by an astronomical sum, the largest single rise in years.
With the rupee touching Rs 130 to $1 with onset of the balance of payments crisis, it’s a fall of 20 percent in seven months. As per a report, the last fiscal year ended with a current account deficit of $18 billion, 5.7 percent of the GDP. The budget deficit crossed 2 trillion rupees. There is a need for $8 billion for debt servicing over the next 12 months and foreign exchange reserves have sunk to $8.9 billion, down from $14 billion a year ago.
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Pakistan’s IMF bailout offers India-US strategic opportunity to choke ISI and Pak Army