Following the approval of a $7 billion program for Pakistan by the IMF, the first tranche of $1 billion has been released under the bailout package. On the other hand, during a meeting in New York, Prime Minister Shehbaz Sharif appreciated the cooperation of the IMF’s Managing Director, and in a meeting with the President of the World Bank, he acknowledged the World Bank’s support for Pakistan’s economic reforms, poverty reduction, infrastructure development, and tackling Pakistan’s economic challenges.
The endorsement by the International Monetary Fund’s board also indicates that the international community, or at least the major powers, are willing to work with the current government. There is no global distrust towards the government of Islamabad. This will also positively impact the country’s foreign policy and its relations with neighboring countries. Now, those political elements within the country who have been trying to undermine the current government globally should also reconsider their approach.
This situation brightens the prospects of improvement in the internal political environment. The IMF package is good news for the country’s economy as it opens the door for investment from friendly nations that had made promises in this regard. Foreign investment will improve the employment situation in the country and enhance production capacity, which will also increase government revenue. The IMF program will create a positive image of Pakistan worldwide, allowing the country to secure further loans from various international financial institutions.
The IMF program helps stabilize the currency and boosts exports, which can help the economy grow and bring benefits to the common people. Without a doubt, the IMF program has brought economic stability to the country, improving the policy rate, and with a 4.5% reduction over the past few months, the prospects for industrial investment have brightened. Additionally, the inflation rate dropping to single digits will provide relief to the people. The value of the rupee is also improving. Real relief means that if the economy stabilizes, industries will thrive, leading to a reduction in unemployment.
In June 2023, Prime Minister Shehbaz Sharif’s previous PDM government successfully secured a 9-month standby package from the IMF to save Pakistan from default. To obtain this aid, Pakistan had to take tough economic measures, which mostly burdened the poor and middle-class citizens. However, this aid helped prevent Pakistan from defaulting, and during the caretaker government led by Anwaar-ul-Haq Kakar, several economic indicators showed improvement due to stringent economic measures.
These positive changes are being recognized by international financial institutions as well. Pakistan has successfully protected the falling value of its currency, and now the decline in the exchange rate of the rupee against the dollar has come to an end. After a long time, the State Bank has reduced the interest rate, which currently stands at 17.5%. These positive indicators are seen as important steps towards steering the national economy in the right direction. However, the IMF program includes conditions such as stabilizing government finances, increasing foreign exchange reserves, and improving the production capacity of state-owned enterprises, aiming to make them profitable.
It can be seen that for a country that has imposed strict import restrictions to maintain foreign exchange reserves and balance payments by taking loans from friendly countries, achieving these goals will not be easy. After overcoming economic turmoil, the tough and challenging task ahead is to boost production capacity. Many nations in history have achieved this goal, transforming their devastated economies into successful productive systems and providing prosperity for their people. Pakistan can also achieve this goal, but it will require determination, political stability, and economic discipline. Inflation has been a major issue in Pakistan in recent years, causing the public to face constant increases in the prices of essential goods. The State Bank has further reduced the policy rate to 17.5%.
Reducing the interest rate plays a crucial role in promoting business growth. It helps increase investment and improve the business environment. Another benefit of lowering the interest rate is that it makes it easier for the public to repay household and business loans, which directly impacts their purchasing power. This will increase domestic market demand, which will have a positive effect on production and employment. Agriculture, one of the key pillars of Pakistan’s economy, contributes about 19% to the country’s total GDP and provides livelihood to millions. To modernize agricultural production, the government has undertaken several initiatives in recent years, such as using improved seeds, enhancing irrigation systems, and providing farmers with modern technology.
As a result of these efforts, Pakistan’s agricultural production has improved significantly, which will not only help meet food needs but also boost exports. Pakistan’s textile industry has always been a major part of the country’s exports. In addition to textiles, the government has introduced reforms in other sectors, such as pharmaceuticals, IT, and automobiles, to stabilize Pakistan’s exports globally. According to a report by the World Bank, Pakistan’s tourism industry has the potential to generate $20 to $30 billion annually if the country improves its tourism infrastructure and provides facilities for international tourists.
International trade agreements and investment can play a key role in stabilizing Pakistan’s economy globally. Projects like CPEC (China-Pakistan Economic Corridor) are playing an important role in Pakistan’s economy. The industrial zones, energy projects, and infrastructure development under CPEC are expected to bring a revolution in the country’s economy. Additionally, the government is striving to increase access to global markets through other international agreements, which will boost national exports.
According to a report, the government has decided to shut down five IPPs and has expedited talks with around 100 IPPs to reduce their profits. The fact is that the excessive burden placed on electricity consumers and the continuous increase in electricity bills have made it almost impossible for ordinary, poor consumers to pay their bills.
Meanwhile, the media has highlighted distribution companies that, without adding a single unit of electricity to the system, are making billions of dollars in annual profits. As the truth came to light and public questions arose, the government changed its stance regarding the IPPs, starting negotiations with these distribution companies and expressing willingness to shut down some of the government’s own IPPs. Moreover, it has been reported that several companies have shown flexibility in reducing prices.
A permanent solution to this issue is necessary, without which neither the public will get relief nor will the national economy be able to move in the right direction. Steps such as reducing interest rates, reforms in the agricultural and industrial sectors, and promoting tourism can help set Pakistan’s economy on the path to progress. While issues like inflation and unemployment persist, the nation must unite to turn these challenges into opportunities. With continued economic reforms and public cooperation, Pakistan will not only overcome these difficulties but also move toward becoming a strong and stable economy. The future of Pakistan is bright, and if we work hard and believe in our abilities, the day is not far when Pakistan will emerge as a developed and prosperous nation on the world map.