IMF loans a continuous saga of conditionality.

The latest in the countries that have received the International Monetary Fund (IMF) loans after Greece and Turkey is Pakistan. This is Pakistan’s thirteenth loan from IMF in the past three decades. IMF has committed to a loan of USD 6 billion disbursed over a period of three years. Pakistan already owes USD 6 billion in outstanding loans to the Fund from previous programmes. According to the IMF, “the country is facing a challenging environment, with lacklustre growth, elevated inflation, high indebtedness and week external position.”  The currency was devalued a number of times and lost almost 35 per cent of value since 2017. According to Dr Abdul Hafeez Shaikh, the Prime Minister’s Adviser on Finance, Revenue and Economic Affairs, the foreign loans have exceeded USD 90 billion and the trade deficit reaching USD 20 billion and a negative growth on exports.

The proposed IMF loan is over and above the loans that Pakistan received from China (USD 3.5 billion), UAE  (USD 3 billion) Saudi Arabia (USD 3 billion). They are also expecting loans from the World Bank and ADB after the IMF’s Board of Directors approves the loan.

The loan discussions, however, faced flak from the US and India. The US felt that the huge Chinese debt was responsible for the economic challenges in Pakistan. One of the major investments of Belt Road Initiative is the USD 60 billion China Pakistan Economic Corridor (CPEC) which is planned to run from northwest China’s Xinjiang province to Gwadar port in Pakistan’s Balochistan province. There are concerns that Gwadar port will also be raising Pakistan’s debt like the Hambantota Port in Sri Lanka.

David Malpass, the World Bank President, in his earlier avatar as the US Undersecretary of Treasury for International Affairs had told the US Congress that the US is making it clear in IMF that any supply of funding to Pakistan should not be used for repaying Chinese loans. Likewise, India has pointed out Pakistan’s funding to terrorism and the need to curtail it as a prerequisite for IMF’s loan.

The IMF loan will come with strict conditionalities as it appears from the IMF briefing and other comments in the media. As a first step, the current Governor of the State Bank of Pakistan (SBP) was removed and a Pakistani economist working for the International Monetary Fund (IMF) has been appointed as the new Governor of the SBP. Both the Finance Minister and the SBP Governor co-signed and sent the Letter of Intent to the IMF Managing Director requesting a bailout package.

The IMF’s mission requires governments to cut subsidies and introduce several reforms. This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilisation and ensuring a more equal and transparent distribution of the tax burden. The bailout will also see an increase in electricity prices. As per IMF, as a first step, the next budget should aim for a primary deficit of 0.6 per cent of GDP supported by tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and improve tax administration

As per CADTM, a debt justice network, under some of the previous IMF structural adjustment programmes, inequality, poverty and unemployment rates have increased. People have hit the streets protesting further privatisation, costlier education, healthcare, electricity, gas, food and other items of daily living. The current IMF loan will only intensify the existing inequalities and push people into further poverty as seen in other places where IMF have intervened. Given the high positions IMF takes on inequality, it needs to be seen, whether the current program will result in the same set of neoliberal agenda by intensifying inequalities, limiting public spending and labour rights.

AIIB raises USD 2.5 billion from Bond Sale

The AIIB raised USD 2.5 billion from the sale of the five-year bonds, after attracting orders of more than USD 4.4 billion from over 90 bidders in 27 countries. AIIB, which now enters its fourth year of operation, has 97 members and has provided more than US$7.9 billion in project finances. AIIB had obtained the AAA ratings — same as World Bank and ADB — from three of the major credit agencies (S &P, Moody and Fitch) in 2017.

China is the largest shareholder of the AIIB with 27.5 per cent of the voting rights. This was the first dollar-denominated bond sale of AIIB in London, which is the established international dollar market. The inaugural sale attracted more than USD 4.4 billion in orders from over 90 bidders.

According to the AIIB’s President Jin Liqun, though the US dollar will remain the major currency of lending, AIIB will be tapping Indian Rupee market by 2020.

AIIB Annual General Body in July

The third Annual General Body Meeting of AIIB will be held on July 12-13, 2019 at Luxembourg. This is the first time AIIB will be hosting a General Body meeting outside Asia. The last General Body meeting witnessed people’s protest with a massive convention on infrastructure financing held alongside with the official Annual General Body Meeting.


  1. The Asian Infrastructure Investment Bank (AIIB): A Multilateral Bank Where China Sets the Rules
  1. Flawed conditions: the impact of the World Bank’s conditionality on developing countries

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