IMF Loan to Pakistan
The media is again abuzz as Pakistan is in the limelight for getting another bailout package from the IMF (International Monetary Fund). To be more precise, a 1 billion-dollar loan tranche, part of the $7 billion larger rescue deal that has been signed in 2024. But why does Pakistan keep needing these bailouts? What are the conditions? And can this really rescue its economy or is it only going to delay another crisis?
In this we will see :
– Latest IMF loan details (2025 update)
– Why Pakistan keeps needing bailouts
– Strict IMF conditions & their impact on people
– India’s opposition & political tensions
– Will IMF loan loan actually work?
– What happens next for Pakistan’s economy
1. The Latest IMF Loan to Pakistan (2025 Update)
- $1 Billion Just Released–More to Come
On May 9, 2025, the IMF approved the second tranche of the $7 billion Extended Fund Facility (EFF) for Pakistan. The total disbursements so far are $2.1 billion, and there is more to be disbursed in the coming months.
But IMF does not just forfeit cash; Pakistan has to keep passing stringent economic tests every few months or they get the next billing.
- An Extra $1.4 Billion for Climate Disasters
Pakistan also qualified under the Resilience and Sustainability Facility (RSF), a $1.4 billion loan specifically for:
– Preventing floods (following the horrendous floods of 2022)
– Climate adaptation (preventing future disasters)
– Water management (to minimize waste in agriculture)
Pakistan has been awarded an IMF loan for climate-related projects for the first time.
2. Why Does Pakistan Continue to Borrow from the IMF?
Since 1958, Pakistan has received 23 IMF bailouts, or nearly one every 3-4 years. This explains why the nation keeps experiencing crises:
1. Foreign Reserves Keep Running Out
In order to pay for imports (oil, machinery, and medicine), Pakistan’s central bank requires US dollars.
However, the nation runs the risk of defaulting on foreign debt if reserves fall too low (below $3-4 billion).
- Reserves as of April 2025: $10.3 billion (better, but still insufficient)
- The IMF has set a target of $13.9 billion by June 2025.
2. Skyrocketing Inflation & Sky-High Prices
Inflation in 2023 stood at a record level of 38%, one of the highest in the entire world.
While the rate has gone down since then to a negligible 0.3% in April 2025, the prices of basic commodities like food, petrol, and electricity continue to be outrageously high, placing an enormous burden on the economic lives of the ordinary Pakistani masses.
- A Mountain of Debt – Who Does Pakistan Owe
Pakistan’s total external debt stands at $130 billion (2024). The biggest creditors are:
- China ($28 billion) – Primarily from CPEC projects
- IMF ($6.2 billion) – From previous bailouts
- The World Bank, together with other international lending institutions,
A default would be disastrous, shutting off the availability of future credit.
- An Inefficient and Flawed Tax System
Just 1% of Pakistanis contribute to income tax. The IMF is demanding:
- Enacting tax policies on high-net-worth individuals and major corporations, especially those that manage to evade taxes.
- Closing the tax exemptions that have been granted to influential and powerful groups.
- Increasing the sales taxes levied on some commodities and goods
Unless this is addressed, Pakistan will keep on requiring bailouts.
IMF Conditions – What Pakistan Must Do
The IMF is not providing free money. Pakistan will have to implement bitter reforms:
- A Taxation Hike (Placing an Increased Fiscal Burden on the Middle Class and the Poor)
- New taxes on farmers & real estate (previously untaxed sectors)
- A rise in the fuel and electricity sales tax will go to make life harder for families and individuals.
- Crack-downs on tax evaders (but will the elite ever contribute?)
- Phasing and Cutting Subsidies (Price Increase of Essential Commodities)
- Electricity rates will skyrocket (most of them cannot even afford it anymore)
- Petrol and diesel prices will rise (driving up transport costs)
- Privatising State-Owned Loss-Making Enterprises
- Pakistan International Airlines (PIA) – Losing billions of dollars every year.
- Power distribution companies (DISCOs) – Biggest contributor to circular debt
- Resolution of Problems in the Electricity Sector, Particularly the Circular Debt Crisis
Pakistan’s circular debt (unpaid electricity bills) totals over $10 billion. The IMF requires:
- Increased rates of electricity (to meet costs)
- Stopping power theft (a massive issue)
- Shutting down inefficient power plants
5. Permitting Rupee’s Value to Fall, Leading to Increased Prices of Imported Products
The IMF wants the rupee to have a market-determined value, not artificially backed macroeconomic management. This means:
- Additional devaluation (rupee can devalue further)
- The imported goods like oil, automobiles, and cell phones will have their prices increasing substantially.
The Indian Opposition – Why Were They Holding Demonstrations?
India officially protested this IMF loan on the grounds:
- Pakistan could be using terror money (in relation to previous attacks) using this IMF loan.
- Past IMF loans have not been successful in stabilizing Pakistan’s economy
But India was unable to veto the loan—IMF bylaws prevent single-country votes.
Pakistan Prime Minister Shehbaz Sharif referred to India’s protest as a “failed conspiracy.”
Will IMF Loan Really Be Effective and Function as Planned?
Temporary Relief (Short of an Effective Solution)
- Effectively precludes instant and catastrophic economic collapse from occurring.
- Enables stabilization of the country’s foreign reserves.
- Keeps critical imports moving
Long-Term and Persistent Problems Still Persist There has not been any remarkable increase or growth in the volumes of exports.
- Corruption & tax evasion persist
- Popular dissatisfaction and anger because of increasing commodity and service prices.
History repeats itself – Pakistan takes a IMF loan, fixes things temporarily, and returns for another bailout in two years.
What Happens Next
- Further Price Increases (Electricity, Petrol, Food)
- Inflation can again surge after rupee devaluation
- Protests are likely to occur if the cost of living becomes too expensive
- But Another IMF Review in 3 Months
- Pass? Well then let’s raise another $1 billion.
- Fail? Back to crisis mode
- Will Pakistan Ever End the Cycle?
Thereupon, only if
- The wealthy and affluent pay their portion and add to the tax base.
- Exports are seeing growth well beyond mere textiles.
- The energy sector is fixed Otherwise, prepare for Bailout #24 by 2027-28.
Final Verdict:
Another Transient Solution IMF rescue remains poised just short of collapse but does not represent a solution. In the absence of concrete reform, the return by Pakistan to needing to be bailed out – along with everyday folk suffering escalating expenses, joblessness, and cutbacks – is guaranteed to become an unpleasant fixture on the calendar.
What are your thoughts regarding this issue?
Is Pakistan ever likely to come out of the IMF Loan trap? Should the International Monetary Fund impose even more stringent and severe conditions? Is there some other way out?
Let us know what you think in the comments!
The India-Pakistan ceasefire breakdown closely mirrors what was seen during Operation Sinoor.