akistan is facing a balance of payment crisis. Despite some improvement in its foreign exchange reserves (~$9 billion) it is still vulnerable to market shocks as these reserves cover only about two months of its (controlled) imports.
This is the reason it requested the International Monetary Fund for a long-term financing programme. The IMF is the lender of last resort, meaning that when all financing options are exhausted it steps in to save a country from default on sovereign guarantees. Before agreeing to help a government, it sends its staff to the country desiring a loan programme and after examining the financial position of that country, recommends action it considers necessary for a return to solvency.
The IMF staff has been negotiating terms with the government for a long-term financing programme since approving the last tranche of its $3 billion programme that ended in June. It outlined the steps that the government must take this year to qualify for the loan.
The conditions outlined by the IMF were the harshest ever that Pakistan has been asked to comply with. However, the economic conditions in the country were also the worst ever. The government agreed therefore to incorporate all the taxation and regulatory measures in the 2024-25 budget that has since been approved by the parliament.
That done, the government is facing stiff resistance from various segments of the population and many businesses. There is however no escape for Pakistan from the measures announced in the budget if it wants to ensure that the IMF board approves the staff level........