Pakistan’s Soaring Debt: Scaling the IMF Ranks

by Antariksh Singh

Pakistan is poised to climb the ranks and become the fourth largest borrower from the International Monetary Fund (IMF) in the world. The country is set to receive an additional $3 billion in loans over the next nine months through a standby arrangement with the global lender.

According to recent data from the IMF, as of March 31, 2023, Pakistan held the fifth position among countries with the highest borrowing from the organization. However, with the recent approval of an additional $3 billion loan, Pakistan will secure the fourth spot on this list.

Previously, in terms of IMF loans, Argentina held the top position with $46 billion, followed by Egypt with $18 billion, Ukraine with $12.2 billion, Ecuador with $8.2 billion, and Pakistan with $7.4 billion.

With the new loans amounting to $10.4 billion, Pakistan will surpass Ecuador and become the fourth largest IMF borrower globally.

As of March 31, 2023, the IMF had issued loans totaling $155 billion, or 115.2 billion special drawing rights (SDRs), to stabilize global financial conditions and support weaker economies. The dollar value is calculated based on the IMF’s SDR valuation, which stood at $1.345 on March 31.

Although a total of 93 countries owe money to the IMF, the top 10 debtors, including Pakistan, account for a significant portion of the outstanding balance at 71.7% of the $155 billion.

Furthermore, Pakistan holds the distinction of being the largest borrower from the IMF in the Asian region. Compared to other Asian countries such as Sri Lanka, Nepal, Uzbekistan, the Kyrgyz Republic, Armenia (West Asia), and Mongolia, Pakistan has far exceeded their borrowing levels from the global lender.

Pakistan’s acute balance of payments crisis, exacerbated by spillovers from the conflict in Ukraine and domestic challenges, has necessitated its reliance on IMF assistance. In August 2022, the IMF extended $1.1 billion to Pakistan as part of a $6.5 billion program agreed upon in July 2019.

However, the high ranking on the list of IMF borrowers highlights the need for sustainable development in Pakistan and a strategy to break free from the debt trap. It is crucial to focus on long-term planning and initiatives that can lead the country towards financial stability and independence, rather than solely celebrating loan approvals from the IMF’s standby arrangement.

A comprehensive plan should be implemented to guide Pakistan in this direction, ensuring a path of sustainable growth and reduced dependency on external financing.

Antariksh Singh

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