Introduction of IMF
The terms of this Agreement, as first agreed upon and subsequently amended, are implemented in the establishment of the IMF (International Monetary Fund) and its operations. The Fund must keep a Special Drawing Rights Department and a General Department to carry out its activities and transactions. The ability to participate in the Special Drawing Rights Department shall be a benefit of membership in the Fund. The General Department, which includes the General Resources Account, the Special Disbursement Account, and the Investment Account under the terms of this Agreement, shall handle all operations and transactions authorised by this Agreement; however, the Special Drawing Rights Department shall handle all operations and transactions involving special drawing rights.
Objectives of IMF
To encourage international monetary cooperation by creating a permanent institution that offers the tools for discussion and cooperation on global monetary issues.
To promote and maintain high levels of employment and real income as well as the developing of the productive resources of all nations as the major objectives of economic policy. This is done by facilitating the expansion and balanced growth of international commerce.
To encourage exchange stability, uphold orderly member exchange agreements, and prevent competitive exchange depreciation
To help remove foreign exchange limitations that impede the expansion of global trade and to develop a multilateral system of payments for current transactions involving members.
To instill trust in members by granting them temporary access to the Fund’s general resources while retaining necessary safeguards, giving them the chance to address imbalances in their balance of payments without taking steps that might harm the prosperity of their country or the world.
In line with the foregoing, to shorten the period and lessen the severity of the members’ foreign balances of payments.
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The International Monetary Fund (IMF) intends to ban Pakistan from borrowing more from China: Reports
The IMF’s suggestions are now likely to be a deciding factor in Islamabad’s decision to ask China for PKR 7.9 billion for projects related to the China Pakistan Economic Corridor (CPEC).
It is unsustainable to drive Pakistan’s economy with aid from abroad; Pakistan urgently needs structural changes. According to Financial Post, the IMF has criticised Pakistan’s loans from China and the arbitrary high payments given to Chinese independent power producers (IPP) and that Islamabad renegotiates its energy contracts with Beijing.
Multiple Chinese IPPs operating in Pakistan are owed more than PRs. 350 billion in power payments. Beijing rejected changing the terms of the agreements for projects under the CPEC, prompting the IMF’s demand.
Since the budget for FY 2022–23 does not address the crucial structural problems that are proving to be a barrier to the rebirth of the country, Pakistan’s economy is facing a difficult struggle.
The economy of the nation is already severely hampered by a massive deficit, and the out-of-control inflation poses a serious risk of impending default. The authorities should have attempted to implement big structural reforms when the IMF deal was on the line, but the budget fell short, according to the media outlet.
More than 40% of the federal budget’s total spending, or PKR 9,502 billion (USD 47 billion), or about PKR 3,950 billion (USD 19.5 billion), is devoted to debt service, a 29.1% increase from the previous year.
Since the budget for FY 2022–23 does not address the crucial structural problems that are proving to be a barrier to the rebirth of the country, Pakistan’s economy is facing a difficult struggle.
The economy of the nation is already severely hampered by a massive deficit, and the out-of-control inflation poses a serious risk of impending default. The authorities should have attempted to implement big structural reforms when the IMF deal was on the brink, but the budget fell short, according to the media outlet.
The federal budget of USD 47 billion proposed by Pakistan’s Finance Minister Miftah Ismail for the upcoming fiscal year has not done much to address the core issues facing Islamabad’s economy.
Pakistan’s Trade deficit reaches a record level
Pakistan’s trade imbalance, which was only $30.96 billion the year before, drastically grew by 57 percent to an all-time high of USD 48.66 billion in the current fiscal year. Despite the Pakistan government’s May prohibition on the importation of more than 800 luxury goods, the trade deficit increased to dangerous proportions, according to the Dawn, which cited preliminary official statistics. Notably, in order to restart the country’s stalled bailout program, the IMF has set strict requirements like boosting power tariffs and placing a tax on petroleum products.
The Extended Fund Facility of the IMF must be revived for Pakistan to recover
Reports state that Pakistan’s economy is already severely constrained by a large deficit, and the ongoing increase in inflation greatly increases the possibility of a looming default. The 2018 fiscal year’s planned federal budget of USD 47 billion from Pakistan’s Finance Minister Miftah Ismail hasn’t done anything to address the fundamental problems plaguing the nation’s economy. The reinstatement of the IMF’s Extended Fund Facility is Pakistan’s only hope because its conventional friends have failed to assist the country. The UN’s financial body expressed regret and annoyance with the fiscal measures implemented to meet its demands to reinstate the USD 6 billion money, nevertheless.
