After months of negotiations, Pakistan and the IMF reached a $3B bailout agreement to stabilise Pakistan’s teetering economy late last week, just hours before their previous arrangement was due to expire.
The IMF and Pakistan go way back: they’ve reached 22 arrangements since the 1950s. This latest deal:
- 💰staves off a sovereign debt default, and
- ⛓️ requires the country to put its finances on a more sustainable footing, through higher taxes and lower spending.
So the news will be met with mixed emotions by Pakistan’s 233 million people, who are already paying Asia’s highest interest rates.
Intrigue’s take: Emerging market debt recently crossed the $100T threshold for the first time ever. And around a quarter of the world’s emerging markets are either in – or at high risk of – debt distress.
So Pakistani officials won’t be the only ones breathing a sigh of relief right now; others will be heartened that a similar IMF deal might be on the table if needed.
Also worth noting:
- Pakistan is due to hold elections no later than 10 November 2023.
- Pakistan has enough foreign reserves to cover imports for a month.