IMF Loan for Pakistan: Relief or Worsening of Social and Economic Hardship? - Capital TV

June 3, 2023


IMF Loan for Pakistan: Relief or Worsening of Social and Economic Hardship?

Anum Razzaque

As Pakistan is negotiating with the International Monetary Fund (IMF) to alleviate its economic crisis, the loan lender is imposing harsh conditions in its bailout efforts. International Human Rights Watch (HRW) has recommended that measures be taken to minimise reforms that could further harm the most vulnerable people.

The International Monetary Fund (IMF) should collaborate with the Pakistani government to protect the economically vulnerable, according to Human Rights Watch.

This can be done by expanding social protection systems and avoiding reforms that could cause harm to the most susceptible people.

“Pakistan is currently facing a severe economic crisis, marked by rising poverty, inflation, and unemployment, which threatens the human rights of millions to health, food, and a decent standard of living,” said HRW.

The Pakistani government started official negotiations with the IMF on February 1, 2023, to devise a plan to revive the economy, which includes a $1.1 billion loan installment from a $6.5 billion bailout package created in 2019 to prevent economic collapse.

“The crisis has driven millions of Pakistanis into poverty and violated their basic social and economic rights,” stated Patricia Gossman, Associate Asia Director at Human Rights Watch. “The IMF and the Pakistani government must tackle this crisis by giving priority and protection to low-income individuals.”

Pakistan’s central bank’s foreign exchange reserves have decreased by 16 percent to $3 billion in the week ending January 27, which is less than three weeks of import coverage.

The country is facing high inflation rates and a shortage of foreign currency, leading to scarce or unavailable imports including essential medicines.

Pakistan’s largest social safety net program, the Benazir Income Support Program (BISP), provides cash transfers to women in extreme poverty.

“The program needs to be expanded to protect larger segments of the population from potential IMF-mandated price hikes for necessities,” recommended HRW.

Pakistan is negotiating with the IMF for a loan to clear its ninth review of the Extended Fund Facility and alleviate the shortage of foreign exchange and unlock access to other funding sources.

However, IMF loan conditions could either relieve or worsen social and economic hardship for Pakistanis.

The IMF has asked Pakistan to remove energy and fuel subsidies, move to a market-based exchange rate, and increase its general sales tax rate.

However, increasing value-added taxes could negatively impact low-income people. The IMF should assess the impact of its loan conditions on low-income people and implement safeguards to protect their economic and social rights.

Pakistan’s economic crisis is compounded by devastating floods that killed over 1,700 people, destroyed homes and crops, and affected over 30 million people in August 2022.

Poverty is concentrated in rural areas, which were hard-hit by the floods. The IMF should provide time and flexibility to Pakistan for a sustainable, inclusive, and rights-based recovery.

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