The International Monetary Fund (IMF) is facing a “Pakistan dilemma” in lending to the country, according to a report by the Center for Global Development (CGD).
The report, titled “Pakistan’s Budget and the IMF’s Pakistan Dilemma”, released on Thursday, said that while the IMF has lent money to Pakistan to help the country cope with its economic crisis, the country’s budget deficits and its reliance on foreign aid to plug the gap have meant that the IMF’s loans have had little impact on Pakistan’s economic outlook.
The report said that the IMF’s loans have not been sufficient to reduce the country’s budget deficit, which has widened from 4.7 percent of GDP in 2017 to 7.4 percent of GDP in 2019.
The CGD report also said that the IMF’s loans have not helped the country’s external debt, which has risen from 6 percent of GDP in 2017 to 11 percent of GDP in 2019.
The report said that the IMF’s lending to Pakistan has been “largely ineffective” in helping the country to address its economic challenges.
It said that the IMF has “failed to provide appropriate incentives and conditions that would encourage Pakistan to take the necessary steps to achieve fiscal and monetary stability”.
The report also noted that the IMF’s loans have been insufficient to help the country to increase its exports and reduce its reliance on remittances, which have fallen from 8.7 percent of GDP in 2017 to 6.9 percent of GDP in 2019.
The report concluded that the IMF’s “Pakistan dilemma” has resulted in a “persistent and growing economic crisis” in the country. It said that the IMF should consider alternative measures to help the country, such as providing technical assistance and increasing access to capital markets.