Pakistan Needs $8-10 Billion To Avoid IMF Loan
As the new government of Pakistan is facing huge economic crises, the total debt is already 82. 6% of the GDP. Government has left with no option but to consider loan from IMF to fix all country’s economic crises. This year Pakistan is getting largest loan fund. Previous government reserved and managed the exchange rate to Rs 106. Rupee experienced depreciation many times against dollar after former finance minister stepped down. Previous government also has received bailout packages. Previous loans were received to reduce inflation and fiscal deficit. Government have to first convince IMF officials to grant additional funding other than existing loan in easy and flexible conditions. Government can only avoid loan from IMF if Pakistan gets $8-10 billion from friendly countries which are China and Saudia Arabia to fill the gap of deficit.
IMF loan should be considered only if nominal and minimal interest rate are offered. Pakistan lost 1300 points in stock exchange which is the highest crash of stock market, lost almost Rs. 270 billion of its capital. Pakistan has received many loans from IMF previously. Rupee depreciated further in last few days and this was a biggest jump in dollar rate till now. In one day, rupee get depreciated 7. 4% from previous day. The price of one dollar raised from Rs 124. 33 to Rs 133. 6 and this was highest ever rate of dollar. Now, Prime Minister of Pakistan gave the permission to finance team to visit Washington for an IMF program.
The loan will bring out Pakistan from defaulting on foreign payments but it will have some restrictions. One of the restrictions will be free float exchange rate as to manage exchange rate. This means central bank will not involve in market, market forces will control the rate of dollar against Pakistani rupee. Dollar raised its rate because central bank was not selling dollar in market but other national bank was selling. Bailout package will affect the market expectations, dollar will shoot up in beginning but will settle down later. Experts says it will rise to Rs 140 or even Rs 150 but will settle to Rs 135. Government is also going for IMF because imports exceed its exports by $2. 7 billion, now we are left with very few reserves to pay for necessary imports i. e. oil, machinery, raw material etc. Foreign loans areof $90 billion and we have to repay it. Government is now with lowest level of foreign exchange reserves which is $8. 4 billion and we cannot sustain not even for two months.
However, Pakistan has frequently had programs in past years. IMF will definitely react to request of bailout package in emergency basis and demands will be fulfilled.
