Pakistan gets IMF tranche but economy too stretched to sustain long standoff

The Board of the International Monetary Fund Friday cleared $2.3 billion in funding for cash-strapped Pakistan, even as New Delhi abstained from the vote after having firmly opposed the move stating providing funds to a country that supports cross border terrorism carries reputational risks and undermines international norms.

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The lifeline notwithstanding, high debt and perilously low foreign exchange reserves significantly add to the fragility of the Pakistan economy, which is grappling with an almost perennial balance of payment crisis and high inflation in recent years.

Its external debt jumped to over $130 billion in 2024, with more than a fifth of this estimated to be owned by its key ally China. Its forex reserves are pegged at a little over $15 billion, capable of paying for just about three months of imports. The forex reserves remain low relative to funding needs, with over $22 billion of public external debt, including nearly $13 billion in bilateral deposits, maturing in FY25, as per a Fitch report in February.

the Ministry of External Affairs said it would ask the IMF board members to look “deep within” and take facts into account before generously bailing out Pakistan.In such a dire situation, a money-guzzling conflict with India should be the last thing on a beleaguered Islamabad’s mind, as it would have to essentially fund any long-drawn-out conflict with borrowed money. And while a prolonged military conflict with Pakistan is bound to impact India to some extent, the world's New Delhi is far more equipped to handle the economic impact. These crucial points have been underscored by experts and analysts more than once.