Not the end of a tough road

On Friday, Pakistan finally received what many commentators hailed as a ‘breathing space for its embattled economy’ after months of uncertainty when the International Monetary Fund (IMF) announced that its staff had signed off on a short-term $3 billion loan structured over a period of nine months. That the IMF preferred to give Pakistan, teetering on the brink, a new deal under the IMF’s Stand-by arrangement (SBA) instead of completing the ninth review of its Extended Fund Facility (EFF) facility to release the $1.2bn tranche stuck for the last eight months as requested by the government shows the trust gap still persists. The EFF expired on June 30, adding to the long list of IMF programmes that could not be completed. As mentioned in the final mission statement, the lender blames “some policy missteps, including shortage from constraints on the functioning of the foreign exchange market, along with internal and external shocks — Ukraine war, devastating floods last year, and international commodity super cycle — for stalling economic growth”.