Pakistan seeks cash bailout as its financial woes deepen after political turmoil and devastating floods
Pakistan is in talks to release of $1.1bn (£890m) of cash from the International Monetary Fund (IMF) to help ease its financial crisis.
Pakistan’s economic woes are a culmination of years of political turmoil, a financial crisis and last year’s catastrophic floods, with its reserves only able to cover three weeks – rather than the required three months.
Inflation is also thought to stand at around 24% to 26%, according to the country’s finance ministry, and the currency has been devalued against the dollar.
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The IMF delegation will be encouraging the Pakistani government to implement bold cost-cutting measures to help it bridge its financial gap, with mission chief Nathan Porter saying: “You don’t have any other option.”
In 2019, Pakistan secured a $6bn (£4.9bn) bailout from the IMF. It got another $1bn (£811m) last year to help overcome the devastating floods, but in November the IMF suspended payments, saying the government failed to make progress on its fiscal consolidation.
In response, Ishaq Dar, the country’s finance minister, told the IMF it had made some efforts to bring its crisis under control, including increasing taxes on petrol and natural gas, and increased prices for electricity.
If released, the cash from the IMF would go towards paying its external debt to the tune of $8bn, which has to be paid by the end of June.
Backlogs at ports, factories closed and electricity blackouts
The government has stopped issuing lines of credit, causing a backlog of container ships at the port of Karachi, while industry has been battered by the currency devaluation and imports block.
Domestic investment has dried up, with textile factories partially closing due to demand, and construction projects have been delayed due to lack of investment.
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Communities flee flooding
There has also been severe energy shortages, which has hindered remaining economic activity, while companies that generate and supply energy struggle with the high costs of fuel and turn off the electricity grid to save money.
Last week the country of 243 million people was plunged into darkness after a major breakdown of the national grid, which lasted several hours – the impact was felt on schools, hospitals, businesses and industry further hindering economic activity.
The country’s economy has been faltering for many years, with the floods in 2022 pushing it over the edge.
Pakistan’s floods impacted a third of the country and wiped out millions of hectares of crops. Almost 2,000 people were killed, and around 33 million people were displaced, with damage thought to cost around $40bn (£32.4bn).
Successive governments have been accused of making little effort to widening the tax net and increasing sources of revenue, while loans from allies such as China, Saudi Arabia and the United Arab Emirates kept its economy afloat.
Fuel taxes have been increased. File pic: Reuters
Some blame former PM Imran Khan
Former prime minister Imran Khan, and his government, have been accused of contributing to the immediate crisis. A year into his premiership, the fiscal deficit shot to a record high of $25.3bn (£20.5bn) and by the time he was ousted early last year, inflation was over 12%.
Mr Khan delayed approaching the IMF, despite economists recommending it, saying he wants to shun the practice of approaching foreign entities with a “begging bowl”.
However, his government was unable to bear the costs of a slew of welfare schemes it rolled out – though it helped his popularity.
His government’s reluctance to increase fuel costs, even in early 2022 when international crude rates had breached the $100 mark due to the war in Ukraine war, meant the state exchequer lost precious dollars.
Is Pakistan going the same way as Sri Lanka?
There is comparison of what is taking place in Pakistan with the collapse of the Sri Lankan economy last year.
But this is unlikely, as almost half of Sri Lanka’s external debt was owed to private creditors while for Pakistan, this is only about 8% of what it owes.
Pakistan’s large bilateral loan payments are to friendly countries like Saudi Arabia, the UAE, and China, which will be rolled over.
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With the present government starting to implement changes that would satisfy the IMF and a release of the $1.1bn tranche, this will pave the way for the release of the loan and other bilateral assistances.
But more importantly, Pakistan is a nuclear nation and a geostrategic country, and its allies, and the world, would prevent its economy from collapsing.
World
Dublin protests: Prams filled with fireworks as teens – and children as young as seven – clash with police
At least 23 people have been arrested during a second night of violent disorder near an asylum hotel in Dublin.
Two police officers were taken to hospital with injuries sustained during clashes with protesters – including one who was struck on the head by a bottle.
A Sky News crew was caught in the confusion as police charged at crowds, who were throwing fireworks, stones and other debris.
Pic: PA
It is the third night of demonstrations at the Citywest Hotel following an alleged sexual assault in the early hours of Monday morning.
A demonstration in the wake of the incident, which allegedly involved a 10-year-old girl, turned violent on Tuesday night. A police officer was injured and six arrests were made.
A 26-year-old man, who cannot be named due to rules that apply to all sexual assault cases in the Republic of Ireland, appeared in court on Tuesday charged over the alleged attack.
Gardai officers block protesters near the Citywest Hotel in Dublin. Pic: PA
Police had earlier pledged a “robust response” if the violence continued.
Between 7pm and 8pm, hundreds of protesters faced off with around 40 uniformed officers.
The uniformed officers were replaced with the Public Order Unit, who were carrying plastic shields and additional body protection.
A police van was set on fire on Tuesday night.
Protesters detained after stand-off
Hundreds of protesters had been facing off against the public order unit of the Irish police force along Citywest Drive.
While large parts of the crowd dispersed throughout the night, an additional public order unit was deployed to tackle those remaining at the protest shortly after 10pm.
A number of protesters have been detained after fireworks and rocks were thrown at police. Pic: PA
Several of those caught between the two units were tackled and detained as they tried to flee.
Justice minister Jim O’Callaghan said “many have been arrested” and “more will follow” – and went on to praise officers who had responded professionally to “thuggish violence” in the area.
Mr O’Callaghan vowed that those arrested would be “charged, named and dealt with relentlessly” by the criminal justice system.
World
Donald Trump imposes sanctions against Russia’s two biggest oil companies as frustration grows with Vladimir Putin over the Ukraine war
Donald Trump has imposed sanctions on Russia’s two largest oil companies – and spoke of his frustration with Vladimir Putin.
In a major policy shift, new restrictions have been unveiled against Rosneft and Lukoil – as well as dozens of subsidiaries – due to “Russia’s lack of serious commitment to a peace process to end the war in Ukraine”.
“Now is the time to stop the killing and for an immediate ceasefire,” Treasury Secretary Scott Bessent said in a statement.
“Given President Putin’s refusal to end this senseless war, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine. We encourage our allies to join us in, and adhere to, these sanctions.”
The move marked a significant change for the Trump administration, which has veered between pressuring Moscow and taking a more conciliatory approach aimed at securing peace in Ukraine.
US Treasury Secretary Scott Bessent speaks to reporters at the White House. Pic: Reuters
Trump frustrated with Putin
The US president has resisted pressure to impose energy sanctions on Russia, hoping that Putin would agree to end the fighting. But with no end in sight, he said he felt it was time.
Mr Trump explained he has a “very good relationship” with his Russian counterpart, but felt he had to cancel their planned meeting as “it didn’t feel right to me”.
In a sign of growing frustration, he told reporters: “It didn’t feel like we were going to get to the place we have to get. So I cancelled it. But we’ll do it in the future.
“I have good conversations. And then, they don’t go anywhere. They just don’t go anywhere.”
He also hinted that the sanctions could be lifted if the Russian president was prepared to cooperate in peace talks.
“We hope that they [the sanctions] won’t be on for long,” he said in the Oval Office. “We hope that the war will be settled.”
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Putin-Trump talks: The view from Moscow
Trump wants Xi to help with Ukraine
Ahead of a meeting next week with Chinese President Xi Jinping in South Korea, Mr Trump said he would like Beijing to help put pressure on Moscow to halt the fighting.
“I think he [Xi] can have a big influence on Putin. I think he can have a big influence … he’s a respected man. He’s a very strong leader of a very big country. And we will certainly be talking about Russia-Ukraine,” he said.
Xi and Putin have formed a strategic alliance between their countries.
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Why Tomahawks are off the table
Ukraine denied Tomahawk missiles
However, Mr Trump warned he is not prepared to provide Ukraine with long-range Tomahawk missiles, which Kyiv has requested.
He explained it would take the Ukrainians up to a year to learn how to use the “highly complex” weapons.
“The only way a Tomahawk is going to be shot … is if we shot it. And we’re not going to do that.
“It takes a year of intense training to learn how to use it, and we know how to use it, and we’re not going to be teaching other people.”
Storm Shadow cruise missiles made in the UK and donated to Ukraine have once again been used to strike targets inside Russia.
The long-range weapons – which cost roughly £2m each – have been used to devastating effect in the Black Sea, sinking or damaging several Russian ships, and now against a chemical plant.
Last year, Ukraine’s allies lifted restrictions on Storm Shadows and other long-range missiles, meaning Kyiv’s military can use them against targets across the border.
Follow latest: Storm Shadow missiles used in ‘massive’ attack on Russia
A Storm Shadow missile system. Pic: Gary Dawson/Shutterstock
What are Storm Shadow missiles?
Storm Shadows are cruise missiles developed by the UK and France in the 1990s.
Launched from aircraft, they have a range more than 155 miles, manufacturer MBDA says, and can travel at speeds exceeding 600mph.
The missiles can be used with high precision for deep strikes while evading detection, the manufacturer says.
They have been used by the RAF and French air force and in the Gulf, Iraq and Libya, and more recently have been used by Ukrainian forces.
What sets them apart from some other projectiles is they use terrain mapping to navigate to their target, rather than relying just on GPS, military analyst Sean Bell says.
A Tornado GR4 with Storm Shadow cruise missiles. Pic: Crown copyright
How have they been used in Ukraine?
Back in May 2023, the UK government announced it would provide Ukraine with Storm Shadow missiles – the first country to do so.
Since then they have been used by Kyiv’s defenders to strike Russian targets inside Ukraine and also inside Russia.
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While operational details of their use do not always emerge, it has been reported Storm Shadows have been used against targets including military headquarters and ships.
Storm Shadows can likely be operated entirely from within Ukraine, though probably with the assistance of intelligence gathered by Western surveillance planes over international waters.
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