Pakistan and the IMF are no strangers. Since 1958, they have made 21 agreements for loans, not including the most recent one signed on Monday.
The IMF is an international organisation of 189 countries working on monetary cooperation and international monetary stability. It helps member countries in three ways:
The IMF lends its member countries money. These programmes can be divided into:
Lending through GRA (General Resource Account) which is normal lending to not-so-poor and wealthy countries facing economic crisis.
Lending through PRGT (Poverty Reduction Growth Trust) which is lending to not-so-poor and poor countries at a relatively low interest rate to reduce poverty.
The IMF offers a total of 10 programmes through its PRGT and GRA. Of these, Pakistan has taken loans under four programmes. Not all 21 of these agreements are what we call ‘bail-outs’. Pakistan has entered into 12 Stand-by Agreements (SBAs) or what economists call bail-outs with the IMF.
Paying back the loans
Stand-by Agreements or SBAs are short- to medium-term loans that have to be paid back between 3.5 and 5 years. The loan may be given in up to three years, but is usually given in a 12 to 18-month period. Stand-by Agreements come under the General Resource Account, which means they’re not specifically designed for poor countries, unlike programmes under the Poverty Reduction Growth Trust.
But what about the remaining nine agreements? These agreements are for a number of IMF programmes aimed at poverty reduction, structural reform, containing a domestic economic crisis, or protecting smaller weaker economies against the effects of a broader international crisis.
Of the nine loans, other than bail-outs taken by Pakistan, four were given under the PRGT, which means they were given to us to help alleviate poverty and boost economic growth.
New trend in our loans
When it comes to Pakistan, we see an interesting trend with the IMF programmes — they are becoming longer and larger. By longer, we mean the pay-out period is increasing. For example, between 1958 and 1977, all the programmes were of one year. Coincidentally, all the IMF programmes in this period were also bail-outs or Stand-by Agreements. There were a total of seven programmes.
Between 1980 and 1995, we were part of another seven programmes and all but one were between one and two years long.
Between 1997 and 2013 — when the PML-N took out the last $6.4 billion loan — there were a total of six programmes. With the exception of one, all of them were approximately three years long.
This is the 13th time we are going to the IMF to ask for a bail-out, and overall it will be the 22nd loan we have taken from the IMF.