How IMF aggravating financial troubles of Pakistani masses

By: Moazzam Ishaq      Published: 07:03 PM, 1 Dec, 2021
How IMF aggravating financial troubles of Pakistani masses

Pakistanis were about to breathe a sigh of relief after news of the International Monetary Fund and Pakistani officials reaching an agreement over the terms of their loan package started circulating recently, before the complete extent of the agreement was made public. The staff-level agreement arrives following negotiations that lasted nearly 1.5 months, from October 4 to November 18, and would result in the release of more than $1b to the troubled South Asian economy.

While the conclusion of the talks is good news for the country’s masses, its terms most certainly are not. Two of the IMF’s demands according to the latest agreement are a further increase in the prices of modern-life staples: electricity and petroleum, both of which were already a point of concern for the Pakistani masses.

"The agreement is subject to approval by the Executive Board, following the implementation of prior actions, notably on fiscal and institutional reforms," the IMF further noted. The Executive Board would await the execution of the terms by the Pakistani government before releasing the due tranche.

The agreement – which, on Pakistan's part, sought relaxation in the IMF's terms – would release SDR (Special Drawing Rights) worth 750 million or around $1 billion in partial fulfilment of an agreement signed in May 2019 and executed in July 2019, according to which the IMF is to deliver funds worth $6 billion over a period of 39 months – or 3 years and 3 months – to the economically challenged South Asian country. The release of funds, however, was subject to renewal at regular intervals, requiring the IMF's approval.

The execution of the package, termed the Extended Fund Facility (EFF), has not been a smooth ride for Imran Khan's government, having faced multiple stumbling blocks so far. The programme was once previously suspended in January 2020, when Imran Khan refused to increase the price of electricity or impose higher taxes across the country, as recommended by the IMF.

The latest round of negotiations lasted over a month before reports came out on November 22 of an agreement, according to which Pakistan's Financial Advisor, Shaukat Tarin, and his team agreed to take four steps to fulfil the IMF's end of the terms. First, the Pakistani team of officials agreed to end tax exemptions and subsidies. Second, it agreed to increase energy tariffs. Third, it agreed to increase the price of petroleum. And lastly, it agreed to deliver an audit of $1.4 billion of additional funds, lent to the Pakistani government in April 2020.

"They have asked for it, and we have to do it," Tarin commented on the audit.

The lengthy period over which the latest round of discussions lasted, itself, delivered a strong blow to the South Asian country’s economy, causing the Pakistani rupee to plummet to an all-time low against the dollar earlier in November. At one point, the rupee lost nearly Rs.6 in value inside a week, as a result of what is believed to be panic buying of the greenback amidst uncertainty caused by the prolonged talks between the Pakistani finance team and the IMF.

The government's agreement, to what is widely believed as tough terms set by the International Monetary Fund, has not been welcomed by the crisis-stricken country or its 220 million population. Already borne down by an unprecedented rise in inflation, the country’s masses are unable to cope with the repercussions of the country’s tumultuous economy, and its dealings with the international money lender.

As if the IMF’s tough terms were not enough, the rising petrol prices sparked a nationwide strike at gas stations, called by the All-Pakistan Petrol Pumps Dealers Association. The strike was due to the government's unwillingness to increase the petrol dealers’ profit margin: probably the government's attempt at providing some degree of relief to the masses. However, after a day-long negotiation, the association decided to call off its strike on Thursday after the government, reportedly, agreed to increase the profit margin of petrol pump dealers.

The All-Pakistan Petrol Pumps Dealers Association's chairman, Abdul Sami Khan, confirmed that they demanded a six percent increase in their margin, however, they finally settled for a 4.4 percent increase. As a result, petrol dealers would now secure a profit of Rs.4.90 per litre, Re.1 more than what they were previously getting. The change in prices, the chairman added, would be executed when the government would announce the fuel rates for the next month.

Sandwiched between international giants and local businessmen, the Pakistani common man suffers. The petrol dealers’ strike and the government’s concession means that the common man would have to bear most of the brunt of the IMF’s updated demands. Whether or not the government was right in conceding to the demands of the petrol dealers – who, in turn, must also be suffering from the damaging effects of all-round inflation – cannot be ascertained, but it is evident that the government’s soft-dealing with protests across the country is giving a signal to all and sundry about its inability to tackle with pressure.

Contributed by Moazzam Ishaq, an independent journalist and social media influencer from

Jhelum-Pakistan. He tweets at @moazzamishaq

Categories : Opinion
Moazzam Ishaq

Moazzam Ishaq, an independent journalist and social media influencer from Jhelum-Pakistan.