Why Pakistan needed another bailout from IMF, what this will entail

Context 

• Pakistan has once again secured a $7 billion financial assistance bailout package from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) in September 2024.  This aims to stabilize the country's fragile economy, which has been plagued by external debt, inflation, and dwindling foreign reserves. 
• The bailout comes after previous IMF programs and stand-by arrangements that aimed to stabilize the economy but have left Pakistan with a heavy burden of structural reforms to meet.

Background 

• In 2019, Pakistan entered the IMF’s EFF program but was hit hard by the global impacts of the Covid-19 pandemic, the Russia-Ukraine war, and severe floods in 2022. 
• By November 2022, the IMF had paused disbursements of funds due to Pakistan's failure to meet the stringent conditions imposed by the IMF.
• The economic crisis deepened in 2023, with inflation peaking at 38%, and the Pakistani rupee losing 20% of its value against the US dollar
• In July 2023, Pakistan secured a nine-month $3 billion Stand-By Arrangement (SBA) from the IMF, which imposed strict conditions to maintain fiscal discipline, implement structural reforms, and stabilize the exchange rate. 

IMF’s Extended Fund Facility