The International Monetary Fund (IMF) intends to ban Pakistan from borrowing more from China, according to reports.
Islamabad’s plan to request PKR 7.9 billion from China for China-Pakistan Economic Corridor (CPEC) projects will now likely depend on IMF recommendations.
Driving the Pakistani economy with the help of external subsidies is unsustainable and Pakistan desperately needs structural reforms. The IMF has raised objections to Pakistan’s loans to China and arbitrarily high payments to Chinese independent power producers (IPPs), suggesting that Islamabad renegotiate its energy deals with Beijing, the Financial Post reported.
Pakistan is obligated to pay more than the PRs. 350 billion of electricity due to several Chinese IPPs operating in the country. The IMF’s request follows Beijing’s refusal to change the terms of agreements for projects under the CPEC.
A large part of the budget expenditure of PKR 3.950 billion (USD 19.5 billion) – more than 40% of total federal budget expenditure (PKR 9.502 billion; USD 47 billion) is allocated to servicing the debt, which is up from 29.1% compared to the previous year.
Pakistan’s economy faces a difficult task as the budget for the financial year 2022-23 failed to address major structural issues that are proving to be a hindrance to the country’s recovery.
The country’s economy is already marred by a huge deficit as inflation spins out of control with a looming threat of impending default. With the agreement with the IMF on hold, the authorities should have tried hard to undertake bold structural reforms, but the budget disappointed, according to the media portal.
Pakistani Finance Minister Miftah Ismail’s $47 billion federal budget for the following fiscal year did very little to address the fundamental problems facing Islamabad’s economy.
While Pakistan’s traditional partners have been hesitant to bail out the country from this huge debt, its only hope lies in the revival of the IMF’s Extended Financing Facility. However, the IMF has expressed displeasure and displeasure with the measures included in the budget to fulfill its $6 billion funding stimulus conditionality.
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