Pakistan’s reliance on the International Monetary Fund (IMF) has become a cause for concern as the country has had to turn to the IMF 23 times for assistance, the highest number for any country. Argentina comes in second with 21 programmes. This frequent reliance on the IMF has been dubbed by former Deputy Governor of the State Bank of Pakistan, Murtaza Syed, as Pakistan being the “most loyal customer” of the IMF.
In contrast, India has only used the IMF seven times, and has not done so since the landmark Manmohan Rao reforms of 1991. The fact that Pakistan has had to turn to the IMF so many times has been a cause of concern for experts, with Syed highlighting that running to the IMF 23 times in 75 years is no way to run a country.
Pakistan owns below $3 billion in foreign exchange reserves, and its foreign reserves have never exceeded $21 billion in its history.
In contrast, Bangladesh owns around $35 billion, while India has nearly $600 billion. China owns about $4 trillion. Since the early 1990s, Pakistan has enjoyed 11 IMF programmes, while Bangladesh has had three, and India and China have had none. Pakistan’s economy is in crisis for months, with inflation, the falling value of the rupee, and a drop in foreign reserves.
Notably, the economic crisis comes around every few years in Pakistan, as the country relies heavily on external debt due to an economy that does not produce enough and spends too much. In 2023, internal political instability and the flooding catastrophe have worsened the situation, with external factors such as rising global food and fuel prices adding to the crisis.
According to Topline Securities, a Pakistani stockbroker, Pakistan must repay $73 billion by 2025. However, experts say that the country cannot meet that obligation, which means that even if it gets back into the IMF programme, it will still need to negotiate debt restructuring further down the line. A debt restructuring involves negotiating debt forgiveness and rescheduling of repayments, and WSJ reports that it is a default of sorts.
China has invested around $25 billion in Pakistan on roads, power plants, and a port, making Pakistan one of China’s closest allies. However, Pakistan’s debt servicing burden has put it in the same category as developing countries that have already defaulted or are vulnerable to default. Charles Robertson, who is global chief economist at Renaissance Capital, says that Pakistan will struggle to get through this year, and while a default looks likely, it is not a given. Robertson adds that Pakistan could still take measures to resolve the situation.