What institution intervened to prevent Pakistan’s default in 2022?
A. World Bank
B. Asian Development Bank
C. IMF
D. Exim Bank
Explanation:
In 2022, Pakistan faced a severe balance-of-payments crisis that brought the nation to the brink of default. To avert this economic catastrophe, the International Monetary Fund (IMF) intervened by providing a critical bailout package. This intervention was pivotal in stabilizing Pakistan’s economy and restoring investor confidence.
IMF’s Intervention in Pakistan’s 2022 Economic Crisis
Background
In 2022, Pakistan grappled with a daunting economic crisis characterized by dwindling foreign exchange reserves, escalating inflation, and a burgeoning fiscal deficit. These challenges threatened the nation’s financial stability and raised concerns about a potential default on international obligations.
IMF’s Role
To mitigate the looming crisis, Pakistan sought assistance from the International Monetary Fund (IMF). In June 2023, after extensive negotiations, a staff-level agreement was reached, leading to the approval of a $3 billion bailout package. This financial support was instrumental in stabilizing Pakistan’s economy, providing much-needed liquidity, and facilitating economic reforms.
Impact of the Bailout
The IMF’s intervention had several significant outcomes:
- Economic Stabilization: The infusion of funds helped stabilize the currency and bolster foreign exchange reserves.
- Policy Reforms: The agreement mandated structural reforms aimed at fiscal consolidation and improved governance.
- Investor Confidence: The bailout reassured international investors and creditors, averting a potential default.
Conclusion
The IMF’s timely intervention in 2022 was crucial in preventing Pakistan’s economic collapse. By providing financial assistance and guiding policy reforms, the IMF played a vital role in steering the country towards a path of recovery and sustainable growth.
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