A Pakistani dealer counts US dollars at a currency exchange shop in Karachi (ASIF HASSAN)

Islamabad (AFP) – Pakistan will get $6 billion from the IMF over the next three years to meet its foreign debt obligations, the country’s advisor on finance said on state television, after signing the agreement. 

The deal comes after months of negotiations over what will be Pakistan’s 22nd bail out aimed at staving off a potential balance-of-payments crisis as the country struggles with a stagnating economy.

Pakistan’s advisor on finance said that foreign loans have exceeded $90 billion, and exports have registered a negative growth over the past five years.

“So Pakistan will get $6 billion from the IMF, and in addition we will get $2 to $3 billion from the World Bank and Asian Development Bank in the next three years,” said  Abdul Hafeez Shaikh during the broadcast.

“The trade deficit reached $20 billion and our foreign exchange reserves have dipped by 50 percent in past two years. So we have a $12 billion gap in our annual payments and we don’t have the capacity to pay them,” he added.

The IMF said that its team reached an agreement on policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about $6 billion.

“The program aims to support the authorities’ strategy for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending,” said Ramirez Rigo, head of the IMF delegation, in a statement released late Sunday.

– Battered economy –

A government report published Friday said that Pakistan’s growth rate is set to hit an eight-year low.

A report by Pakistan’s National Accounts Committee forecast growth of a mere 3.3 percent in the current fiscal year against a projected target of 6.2 percent.

Analysts have warned that any fresh IMF deal could come with restrictions that would hobble Prime Minister Imran Khan’s grand promises to build an Islamic welfare state.

Discontent is already growing over the measures the government has taken to fend off the crisis, including devaluing the rupee by some 30 percent since January 2018, sending inflation to five-year highs.

The United States has warned that it will be watching closely to ensure Pakistan does not use IMF money to repay debts to China, which has poured billions into the country for infrastructure projects under its Belt and Road Initiative.

Pakistan has had 21 bailouts since it joined the IMF in 1950. Its most recent loan was issued in 2013, worth $6.6 billion.

The United Arab Emirates, Pakistan’s largest trading partner in the Middle East and a major investment source, recently offered $3 billion to support the battered economy.

Islamabad also secured $6 billion in funding from Saudi Arabia and struck a 12-month deal for a cash lifeline during Khan’s visit to the kingdom in October.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.