Pakistan is facing an array of economic challenges including high inflation, poverty, poor governance, a shortage of reserves, and rising unemployment. The country has recently begun talks with the International Monetary Fund (IMF) to discuss a plan to rescue its economy, including the revival of the ninth tranche worth $1.1 billion in loans from a $6.5 billion bailout.
Human Rights Watch has called on the IMF to work with Pakistan’s government in addressing this crisis. The organization believes that the IMF and the Pakistani government have a responsibility to prioritize and protect low-income individuals by broadening social protection systems and minimizing reform measures that might harm the most vulnerable.
According to SBP data, foreign exchange reserves in the country have fallen 16% to their lowest recorded level of $3.09 billion, an amount that covers less than three weeks of imports. Inflation in Pakistan has also reached its highest levels since 1975, with perishable food items rising more than 60% in January.
In response to IMF demands, the government of Pakistan recently increased petrol and diesel prices by Rs35 and removed the cap on the dollar to allow it to be market driven. The ongoing negotiations with the IMF, which continue through February 9, are aimed at clearing the IMF’s ninth review of its Extended Fund Facility, which helps countries with balance-of-payments crises.
If successful, the IMF bailout installment would ease the crippling shortage of foreign exchange and unlock access to other funding, including from multilateral and bilateral donors. However, it is important to keep in mind the potential impact of these reforms on vulnerable populations. The IMF and the government of Pakistan have a responsibility to ensure that the most disadvantaged are not further harmed in the process of reviving the country’s economy.