Last week, the International Monetary Fund (IMF) increased a loan program for Pakistan to $8 billion in an effort to prop up the country’s cash-starved economy, according to media reports. On April 24, Pakistan’s Finance Minister Miftah Ismail said he had asked the IMF to increase the size even further. “I’ve requested the fund and I think they have largely agreed to extend this program for another year,” he said. “I’ve also requested that they enhance the funding available to Pakistan from $6 billion under this program to perhaps a little bit more,” he added. The details will be decided when the mission comes to Pakistan in May, he said.

“Based on the constructive discussions with the authorities in Washington, the IMF expects to field a mission to Pakistan in May to resume discussions over policies,” the Washington-based IMF said in a statement. The 39-month bailout program is subject to regular IMF reviews of Pakistan’s economic policy and growth. In January 2020, it the program was put on hold after Prime Minister Imran Khan did not follow IMF recommendations to increase electricity prices and impose additional taxes. In March 2021, the IMF released a $500 million tranche, and in February 2022 agreed to revive the package.

Ordinary Pakistanis concerned about IMF conditions

Pervaiz Rasheed, a close aide of former Prime Minister Nawaz Sharif, told DW that the beefed-up IMF package will help boost foreign exchange reserves, attract foreign investments, bring down the dollar exchange rate and encourage other lenders to offer loans. Rasheed claimed ordinary Pakistanis would see benefits, as the package could help stem rising inflation.

But people from low-income groups have said they believe that the package will create more hardships. “The IMF will demand increased tariffs on petroleum products and power prices,” Ashfaq Butt, a trade unionist in Punjab told DW. He said higher prices on essential goods make life difficult for common Pakistanis. “I do not understand the complexities of this package, but I want to know if it will help reduce inflation and poverty,” said Mansoor Raja, an Uber driver based in Rawalpindi, a town outside of Islamabad. He told DW that he had heard about such packages in the past. “But all we saw was more inflation and more poverty,” he added.

Saira Feroz, a homemaker in Karachi, said her power bills have tripled with the gradual withdrawal of subsidies. “If more subsides are abolished now, it will really make our lives miserable, said Feroz. Julianna Williams, a senior nurse at Islamabad’s Pakistan Institute of Medical Sciences told DW she fears that the package will pave the way for more privatisation of health care facilities, fueling more unemployment.

What is Sharif government prepared to do?

The government of Prime Minister Shehbaz Sharif has hinted it would end fuel subsidies and assistance for construction and other sectors. Karachi-based economist Kaiser Bengali told that given Pakistan’s critical economic situation, the government had no option but to approach the IMF.

However, there is likely to be public backlash if subsidies are removed. The Awami Workers Party (AWP), a left-wing political organization, has warned the government against withdrawing subsidies. AWP General Secretary Bakhshal Thalho told DW that the withdrawal would trigger mass unrest. “We believe that majority of the working people spend a substantial amount of their income on transport and fuel because of the lack of public transport,” he told DW. “We are already planning protests against this possible withdrawal,” he said, adding that the working masses would never accept this “anti-people package” of the IMF. Thallo said that if the government wants to lower the deficit then it must reduce the defense budget, which in his view is extremely high. The government should also opt for progressive taxation instead of slashing the development budget, he added.

Nasir Mansoor, secretary-general of National Trade Union Federation, told DW that his federation would also hold protests against the IMF package this weekend. “IMF policies have always stoked more poverty, inflation and unemployment,” he said.

(Deutsche Welle or DW, is a German public, state-owned international broadcaster funded by the German federal tax budget.)