IMF bailout would force Pakistan’s Khan to compromise

Subject

Pakistan's likely need for an IMF bailout.

Significance

Prime Minister Imran Khan, sworn in earlier this month, came to power promising to create an ‘Islamic welfare state’. In the fiscal year ending June 2018, the current account deficit was nearly 6% of GDP and the budget deficit nearly 7% of GDP. Pakistan in September 2016 completed a three-year Extended Fund Facility programme with the IMF worth some 6.6 billion dollars, and in the last month has availed of loans worth 2.0 billion dollars from China and 4.0 billion dollars from Saudi Arabia.

Impacts

• The US government will issue further warnings against an IMF bailout being used to pay off Pakistan’s debt to China.
• The revival of ties between Pakistan and Saudi Arabia may hinder Islamabad’s efforts to improve ties with Tehran.
• Khan’s governing coalition will be relatively stable, fewer constituent parties reducing the risk of splits, and the opposition divided.