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Beg, Borrow and Repeat: A Tale of Pakistan’s Obsession with the IMF

Pakistan has developed a vicious debt culture, the hope of exiting looking grim. Whether it be Imran Khan or Shehbaz Sharif, it doesn’t really matter; each prime minister is faced with the same problem of dealing with the mounting debt. And yet, all have failed to solve the persistent issue.

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Pakistan, one of the fastest-growing economies in South Asia for most of the period between 1960-90, has developed a vicious debt culture, the hope of exiting looking grim. Whether it be Imran Khan or Shehbaz Sharif, it doesn’t really matter; each prime minister is faced with the same problem of dealing with the mounting debt. And yet, all have failed to solve the persistent issue.

Pakistan first knocked upon the IMF’s door in 1958 during General Ayub Khan’s time, who took the country down the IMF route and signed an agreement to secure special drawing rights (SDR) of 25 million under a Standby Agreement. However, the money was never withdrawn. Not too long after, Ayub’s finance team pursued two back-to-back IMF programs in 1965 and 1968, respectively. This time, however, they ended up withdrawing the entire agreed-upon amount of around SDR 112 million, officially making Pakistan a new client for the IMF.

General Ayub Khan was succeeded by Zulfikar Ali Bhutto, who, yet again, took the country to the doors of the IMF on May 18, 1972. During his tenure, Pakistan went to the IMF three times consecutively, from 1972 to 1974, and then again in 1977, and withdrew about SDR 314 million against the agreed SDR 330 million.

Read more: IMF reaches staff-level agreement with Pakistan

Zulfikar Ali Bhutto was succeeded by General Zia-ul-Haq, who had his differences with Zulfikar Ali Bhutto, but one thing they could both agree on was developing an obsession with the IMF. During Zia’s tenure, Pakistan went to the IMF twice (1980 & 1981) and secured loans of SDR 2.187 billion, from which only SDR 1.079 billion was utilized.

After Zia’s demise, the democracy returned to the country. During the democracy from 1988 to 1997, Pakistan went into IMF programs about eight times under the experienced and dynamic governments of the PPP (five times) and the PML-N (three times). In this period, Pakistan withdrew about SDR 1.64 billion.

Even in 1999, when General Pervez Musharraf toppled Nawaz’s government through martial law, the country’s obsession with the IMF continued as Musharraf reached out to the IMF and secured SDR 1.33 billion in two attempts in nine years, though on low-interest rates.

The PPP replaced Musharraf in 2008, and the first thing it did was that it went to the IMF and secured the biggest IMF bailout package in our history, amounting to SDR 4.94 billion. The PML-N replaced the PPP in 2013 and went to the IMF as soon as possible, keeping the tradition alive. It secured the second-largest loan, which amounted to SDR 4.399 billion.

Read more: $1.17 billion to be disbursed within three to six weeks: IMF

The PML-N government was succeeded by PTI, which under Imran Khan’s leadership, once again secured a bailout package from the IMF in 2019 that amounted to SDR 4.268 billion. What happened after that is what we have lived through and even are living as the country has just managed to conclude an agreement with the IMF under the incumbent government.

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History of Pakistan’s Lending Commitments with IMF

Pakistan’s repeated knocks on the IMF’s door come whenever the country faces a balance of payments crisis. Pakistan has borrowed from the IMF 18 times since 1972. This can be compared to Bangladesh, which only took out 10 IMF loans for Bangladesh in the same period. Former East Pakistan, who, while it was with West Pakistan, bureaucrats and others, spent all their time lambasting its economic performance!

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