The Struggle of the IMF Loan: Airspace & Saudi Assurance

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Pakistan has been struggling, it’s no secret. No matter how much the Finance Minister tells the people that inflation will cool down soon or that the rupee will gain its value back, there’s no fooling anyone.

This is the exact same thing which the Sri Lankan Finance Minister told his own public. ‘Don’t you worry’, the quote which is supposed to be a magic wand moved to stop the public from panicking.

Leaders of the country have a tendency to do this. Even as President Biden and his advisers said publicly that it was unlikely that the Taliban would come to power, the Taliban gained control of Afghanistan in a fortnight.

As the leaders keep telling us stories about how one thing leads to another and how things are in control, let’s get a clearer picture of what’s been happening behind the curtain, which is a story in the limelight.

Squid Game of Thrones – Pakistani Netflix

Depleting reserves, heavy imports and debt servicing. Those were the perfect ingredients to make the perfect ‘doomsday’, and Pakistan ‘intentionally’ added ‘political uncertainty’.

Quote redesigned from – The Power Puff Girls

The political uncertainty in Pakistan has been an ingredient which has been here since the beginning of the country. It’s been so long that Pakistan can actually claim this as a person does in a relationship, “I am the way I am, take it or leave it”.

With the removal of PTI from the federal government, the removal of PTI from the Punjab assembly and then the removal of PML(N) from the Punjab assembly, this Netflix series has had a roller coaster ride. This is one of the biggest reasons for the depreciating rupee, as when the country has an unstable government, everything else just tends to crumble down.

You wouldn’t even change the CEO of a company as quick as Pakistan changes its prime minister.

Saudi Assurance

It’s not just Saudi Arabia which is in the picture; it’s all ‘friends of Pakistan’. The IMF has made a point that it just doesn’t trust that Pakistan will be able to pay these loans back. The fact of the matter is that we have been taking loans for returning loans. “Give me money, so I can give you back your money from the money that you give me”, and an endless cycle continues.

This time around, the foreign reserves of Pakistan stand below $15 billion, which was the case 5 years ago as well. It’s a thought to ponder, how do we end up with no progress after all these years with an endless loop of taking loans and artificial stabilization of the rupee?

The Washington-based lender wants to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a funding gap. While the IMF loan tranche of $1.2 billion would be crucial, it would still be insufficient for Pakistan to avoid a debt default.

Asset Selling

For Pakistan to secure money from sources which aren’t going to add to ‘debt’, it has decided to sell its assets.

It seems that the government is interested in selling stakes of oil and gas companies and government-owned power plants to the UAE to raise $2 billion to $2.5 billion to avoid the looming default.

The government has adopted the road to privatization to foreign countries & companies to avoid a crisis that Pakistan faces. With the depreciating rupee, the absurd imbalance in our payments & the default crisis, Pakistan has to go against its will and make decisions that are probably against its National interest in the long term but will save the country as it battles for its financial survival.

Stunning rupee recovery – Airspace for Money?

From Rs240 to Rs218 against the greenback, Pakistan has really played its card right somewhere to gain financial stability. It’s no coincidence that the development comes right after the US killed Al Qaeda leader Ayman al Zawahiri in a drone strike in Afghanistan. Just days ago, the strong Army Chief of Pakistan made a call to the US and told them to help Pakistan in getting the IMF loan approved. Well, nothing in this world comes for free and certainly not money.

On Monday evening, the Al Qaeda leader was killed, and the rupee gained Rs22 against the dollar, posting the single highest growth in a day in history on Wednesday as it appreciated Rs10 against the dollar.

There isn’t any confirmation about this happening, but the US needs airspace for their drones, and Pakistan has been doing this in the past. Who is to say they haven’t done it again?

A need to break the cycle

Islamabad might have plans to maneuver itself through this crisis. Regardless of what people might say, if it did happen, the airspace move was a thing to applaud. Pakistan using its strategic location for it’s own benefits is a move which needs to happen more often and has happened many times in the past as well.

One crisis can end, but they never finish coming again. Pakistan needs to evaluate itself and together come towards a plan to move forward. Political parties fighting for the throne is not helping anyone. The menace of corruption and debt default is greater than India. If we can all get together as one when we are out for war against them, why can’t we get together and fight to rid the country of this endless cycle?

Only when Pakistan breaks the loop of repetition – repetition of political crisis, repetition of bad economic policies – only then will we start to head towards the right direction. The selling of assets which were liabilities is a good idea – using our strategic position for gains is one too – but a proper long term plan needs to be set in place which should be followed by all governments to come. One thing should be common in all, we want to succeed.

Want to know about the killing of the Al Qaeda leader? Read about it.


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Shaafay Zia
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