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We need help' Imran Khan on the ropes as Pakistan seeks £9BILLION in IMF bailout

PAKISTAN’S new Prime Minister Imran Khan faces his first major test as the government prepares to ask for the largest bailout ever from the International Monetary Fund (IMF).

Senior finance officials are expected to present the plans to Mr Khan less than a week after his historic election victory.

If the government could secure a loan to from the IMF it would restrict public spending, which would put the ex-cricketeer in a difficult position of potentially going back on his campaign promise of an Islamic welfare state.

One government adviser said: “We are in a rough area and need help. I can’t imagine we could do that without the IMF’s support.”

They added that Pakistan would most likely need a loan between £7.62billion ($10billion) and £9.15billion ($12billion).

This figure is double the £4.04billion ($5.3billion) the IMF lent the country in 2013.
This bailout would also be the 13th IMF bailout for Pakistan.

Analysts also say that a return to the IMF is inevitable and it will damage Mr Khan’s reputation.

Charlie Robertson, global chief economist at Renaissance Capital, said: “This is the first time Imran Khan gets his hands on power and he is going to have to make some very tough decisions.

“He will have to break election promises, at least in the short term.”

The bailout would also cause damaging consequences in the short-term such as raising electricity tariffs, cutting subsidies for the agriculture sector and selling lossmaking public companies.

Mr Khan could see to negotiate a deal with Saudi Arabia to defer oil payments, similar to how they did in 1998.

One of Mr Khan’s campaign promises was to build an “Islamic welfare state” and any restrictions on spending limits would make that difficult to fulfil.

Mr Khan pledged to spend public money on providing access to healthcare for all, expanding the social safety net and upgrading schools.

But analysts have warned that these campaign promises would be hard to fulfil in the reality of Pakistan’s economic situation.

Finance officials believe the loan from the IMF is necessary to solve the country’s escalating foreign reserves crisis.

The country’s foreign currency reserves have declined as oil prices have pushed up the costs of imports as exports still lag.

The latest figures, which were published July 20, show that the State Bank of Pakistan had just £6.86billion ($9billion) in reserves.

This figure is not enough to cover even two months’ worth of imports.

Mr Khan spent his first weekend as the new PM by negotiating with potential coalition allies after falling short of securing a majority by 22 seats.

However, Mr Khan’s victory overturned decades of dominance by the country’s two former ruling families, the Bhuttos and the Sharifs.

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