According to an article in Financial Times, senior finance officials will be presenting the option of an IMF bailout to Imran Khan soon after he takes office.
The loan amount is being expected at between $10 billion to $12 billion, about twice the amount lent by the Fund in 2013 ($5.3 billion). If approved, this would be the 13th IMF bailout package for Pakistan and the largest ever to date.
While the winning party has not declared exactly how it plans to deal with the balance of payments crisis, Pakistan Tehreek-e-Insaf leader Asad Umar, who is expected to be the next finance minister of the country, said that his party is analyzing all options on the table, which includes approaching the IMF for a bailout package. “No option, including IMF, has been ruled out,” Umar said while talking to the media.
With lagging exports, and increasing imports owing to rising oil prices and machinery imports for CPEC related projects, Pakistan has posted its largest ever current account deficit. As a result, foreign reserves have dropped down to merely $9 billion on July 20th, 2018.
So far, the deficits, both current and fiscal, have been financed via loans from Chinese commercial banks.
“It borrowed at least $5 billion from Chinese commercial banks,” says the article in Financial Times.
A worsening balance of payments situation has led the country to depreciate its currency four times up till now since December 2017.
“Western economists say they believe the currency is still overvalued and think it could fall at least another 10 percent,” the article added.
