“The value of a currency depends on market sentiments and prevailing political sentiments. I had always felt the price between 115 and 120.
So that’s where it is, but now it will depend on how the finance ministry manages it,” Mr. Rana Afzal Khan said.
debate over the outgoing Pakistan Muslim League-Nawaz (PML-N) government should have gone to the IMF earlier to avoid the current economic crisis in the first half of the year 2017, but Mr. Khan conceded it wasn’t politically feasible.
With the ministry currently aiming at the bailout, it is the conditions that IMF imposes that may be crucial for the Islamic Republic of Pakistan. First
of all, IMF may want to conduct a debt sustainability analysis under its instructions to determine whether Pakistan can sustain the loan.
will be first such analysis carried out by Pakistan,” said Farrukh Saleem. He believes, “In addition to the debt sustainability analysis, and the usual demand for higher energy prices and taxes, the IMF may also demand transparency for transactions
related to the China-Pakistan Economic Corridor (CPEC).”
Pakistan’s balance of payment crisis stems from a rising trade deficit,
which in turn results from rising imports. It touched a record $60.898 billion at
the end of the last fiscal year. It should be noted that Pakistan does not export any kind of capital goods or services. Thus, there is no scope of ever covering trade deficit in the near term. Thus, recovery is nearly impossible.
As per Salman Shah, “China has a huge role in increasing trade deficit of Pakistan – Pakistan’s imports from China are significantly higher compared to its
own exports back China. This is one of the prime reasons why Pakistan has been trying recently to revise its free trade agreement with China.”
It is Islamabad’s reliance on China, and inflow of CPEC funds, that prompted U.S. Secretary of State Mike Pompeo to issue a warning to the IMF against a bailout package that would eventually aid China.
Secretary of State said, “There’s no rationale for IMF tax dollars, and associated with those American dollars that are part of the IMF funding, for those to go to bail out Chinese
bondholders or China itself.”.