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IMF’s help is not a long-term solution for Pakistan’s fragile economy: Experts

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Pakistan has finally secured the approval of $3 billion from the International Monetary Fund (IMF), unlocking the long-awaited lending that could help stabilize the delicate economy of the country, thought in a temporary period. The approval could help ease the nation’s dire need for cash and somehow give a new start for the country to help rescue its economy.

The Executive Board of the (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of $3 billion, or “111 percent of quota” to support the authorities’ economic stabilization program, IMF said in a statement.

Indeed, the approval comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in the fiscal year.

IMF expects the new approval to lead to Pakistan’s economic reform aims to support immediate efforts to stabilize the economy and guard against shocks while creating the space for social and development spending to help the people of Pakistan.

“Steadfast policy implementation will be critical for Pakistan and the success of the program, which requires greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms related to the energy sector, climate resilience, and the business climate,” the statement added.

Nearly 230 million nations facing acute balance of payment crisis

But experts say that this approval is not a long-time solution for the country where its 230 million nations are facing an acute balance of payments crisis.

The bailout had been frozen since December and the IMF refused to release $1.1 billion of the loan and blamed Pakistani authorities for not complying with the 2019 agreement signed between the IMF and the then Prime Minister Imran Khan.

The hold on the funds was a big headache for the incumbent government and had created fears that the country would default, giving no hope for the country’s economy.

After months of discussion and struggle, finally the ballot has been approved, a Pakistani expert said, but is skeptical the money could solve the longer solution of an economy-starved nation.

In long-term the agreement would fuel further economic crises

“For the time being it may be a relief but in the long-term it would fuel further economic crises in Pakistan,” Shamim Shahid, a Pakistan political expert told Harici.

Inflation in Pakistan touches all time high.

He furthered that “Pakistan’s Non Development and Defense” expenditures are badly affecting its budgetary allocations, developmental and economic sectors.

“Pakistan, if it really wants to end its economic and financial crises, must slash its non development and defense expenditures. With slashing defense expenditures almost all economic crises could be combated and IMF debts may be reimbursed,” Shahid added.

Analysts say that Pakistan needs at least $20 billion in the next two years to pay its foreign loans. The money is included with interest. Meanwhile, the currency value of Pakistan against dollars has dropped significantly.

The currency and inflation is almost out of control, and now all eyes are on the new agreement to at least stabilize the currency and inflation.

Remaining $1.8 billion will be released in two installments

An Islamabad-based writer and expert, Naveed Aman Khan told Harici that at the stage when Pakistan was at the verge of economic collapse the IMF had released $1.2 billion and it is a good sign.

“Remaining $1.8 billion will be released in two installments. By this year Pakistan will have to bear $ 136 billion burden on its shoulders. Last year external loans were $123.57 billion which may reach $152.136 billion by 2027-28,” Khan added.

Khan furthered that foreign reserves are still far beneath country’s level. “China, Saudi Arabia and UAE have extended their cooperation to avoid economic collapse,” he added, calling it a great achievement for the government.

The positive thing is that Pakistan has gone through a number of reforms to meet the demand of the IMF since its mission arrived in the country in February. These changes include revising its 2023-24 budgets. The IMF also demanded the central bank of Pakistan to remain proactive to reduce inflation.

At the same time, reforms in the energy sector which has accumulated $12.58 billion in debt have been a key agenda of the talks between IMF and the Pakistani authorities.

Pakistan’s PM reaction to the agreement

Prime Minister Shehbaz Sharif has welcomed the IMF agreement and said it will help the country improve its economy.

“The approval of the Stand-by Agreement of $3 billion by the IMF’s Executive Board is a major step forward in the government’s efforts to stabilize the economy and achieve macroeconomic stability,” Shehbaz added.

Pakistan primer furthered: “It (agreement) bolsters Pakistan’s economic position to overcome immediate- to medium-term economic challenges, giving the next government the fiscal space to chart the way forward. This milestone, which was achieved against the heaviest of odds and against a seemingly impossible deadline, could not have been possible without excellent team effort,” he added.

Analysts say that the approval of the IMF bailout will also encourage other countries and international financial institutions to help start funding Islamabad to overcome economic challenges.

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South Korean opposition pushes for impeachment of acting PM Han Duck-soo

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The Democratic Party (DP), South Korea’s primary opposition group, filed a motion on Thursday seeking the impeachment of Acting President and Prime Minister Han Duck-soo. The motion, submitted by all 170 DP deputies to the National Assembly, is scheduled for a vote on Friday, according to the legislature’s website.

Han assumed the role of acting head of state after President Yoon Suk Yeol was dismissed on December 14, following the controversial short-term martial law declaration on December 3. The declaration has been widely criticized for plunging the nation into one of its most severe crises in the democratic era. The Constitutional Court is set to determine whether Yoon’s impeachment will be upheld.

While a two-thirds majority vote is necessary to impeach a president, only a simple majority is required for the removal of a prime minister. However, it remains unclear how many votes are needed to impeach an interim president due to the lack of legal precedent. The DP’s motion specifically targets Han in his capacity as prime minister, likely to bolster its chances of success. Ultimately, the Speaker of the National Assembly will decide what percentage of votes is needed for the motion.

If impeached, Han will be suspended from office, pending a review by the Constitutional Court. In the interim, Finance Minister Choi Sang-mok would assume the position of acting speaker.

The impeachment effort comes shortly after Han declined to appoint three Constitutional Court judges critical to the review of Yoon’s impeachment case. Han stated that such appointments could only proceed if the ruling People’s Power Party and the DP reached an agreement. Presently, the nine-member court has three vacant seats.

The Constitutional Court is scheduled to hold its first preparatory hearing on Yoon’s impeachment case on Friday. Yoon has faced mounting criticism for allegedly delaying the process, which could take up to six months, by refusing to accept court documents.

Additionally, Yoon is under legal investigation for prematurely ending the martial law declaration on December 4, following a vote by lawmakers at the National Assembly. The Corruption Investigation Office for Senior Officials (CIO), in coordination with police and prosecutors, has summoned Yoon for questioning after two refusals. The joint investigation team has already detained key figures involved in the initial deployment of troops under the martial law declaration, including former Defense Minister Kim Yong-hyun and former Chief of Staff Park An-soo, on charges of rioting.

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World Bank raises China’s growth forecast, calls for ‘deeper’ reforms

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The World Bank has raised its near-term economic forecasts for China, while reiterating its call for President Xi Jinping to implement profound reforms to address lagging confidence and structural issues in the world’s second-largest economy.

The multilateral lender announced on Thursday that it had increased China’s GDP growth forecast for next year by 0.4 percentage points to 4.5%, reflecting a series of policy easing measures introduced by Beijing over the past three months and the strength of the country’s exports.

For the current year, the World Bank adjusted its full-year forecast upwards by 0.1 percentage points to 4.9%, slightly behind Beijing’s growth target of approximately 5% for 2024. The Chinese economy grew by 4.8% during the first nine months of this year.

Recent pledges from Xi’s economic planners to enhance social welfare and consumption support, alongside reforms in fiscal and tax systems, were also highlighted by the report. However, the bank noted that more detailed plans are required to build confidence among households and businesses.

“Traditional stimulus measures will not be enough to revitalize growth,” the World Bank stated, emphasizing the need for deeper reforms in education, health, social welfare protections, pensions, and the household registration system.

China’s economic growth has slowed significantly this year due to weak domestic demand, deep deflationary pressures, and a prolonged slump in the property market, which has eroded household wealth.

While Xi has shifted economic priorities towards high-tech manufacturing and industrial investment, concerns are growing over the risks to exports—particularly given the potential for new tariffs under Donald Trump’s administration, as he returns to the U.S. presidency next month.

The World Bank also released a new analysis of economic mobility in China, covering the period from 2010 to 2021. By its definition, over half a billion people are at risk of falling out of the middle class just one generation after escaping poverty.

The report commended Beijing for its “dramatic achievement” of lifting 800 million people out of poverty over the past 40 years, with the share of low-income earners in the population dropping sharply from 62.3% to 17%. However, it also pointed out that 38.2% of China’s 1.4 billion population is in the “vulnerable middle class”—above the defined low-income threshold but not immune to the risk of falling below it. According to 2017 purchasing power parity calculations, the low-income threshold was set at $6.85 per day.

“No other region of the world has experienced a faster increase in the share of the secure middle-class population than China,” the World Bank observed. “Yet, the vast majority of the population is not yet economically secure,” it added.

Bert Hofman, former World Bank China director and now with the National University of Singapore, noted earlier this month that the lackluster post-COVID performance of the Chinese economy has exposed weaknesses that have accumulated since the last major financial system overhaul in 1994.

Nonetheless, Hofman acknowledged “promising signals” that reforms could be on the horizon. He cited statements by policymakers suggesting an emphasis on improved income distribution and social security in the latter half of 2024.

“Fiscal reforms are now clearly linked to the Chinese Communist Party’s core objective of ‘high-quality growth,’ and the leadership recognizes that reforms must result in a fiscal system that can deliver efficiency, equity, and stability,” Hofman wrote in his 2025 forecast for Asia Society.

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Pakistan airstrikes in Afghanistan kill 46 people, Taliban warns retaliation

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Pakistan has carried out airstrikes targeting three positions in neighboring Afghanistan late on Tuesday night, and apparently the target was against Tehreek-e-Taliban Pakistan (TTP) armed group in Paktika province – the Taliban defense official warned of retaliation.

However, Pakistan’s Ministry of Foreign Affairs or the country’s military media wing, the Inter-Services Public Relations (ISPR) has remained silent over the airstrike so far.

But the Taliban spokesman said that the strikes occurred in the Barmal district, near Pakistan’s South Waziristan tribal district in Khyber Pakhtunkhwa province, in which 46 people, mostly women and children, lost their lives. He also confirmed that the casualties included those refugees who recently came to Paktiak from Waziristan of Pakistan.

Taliban spokesman Zabihullah Mujahid said that Pakistan targeted four locations in Barmal district and said that six others were wounded in the attack.

Taliban called the airstrikes against international principles and clear aggression against Afghanistan.

Taliban defense ministry also coiffured the attacks and said that civilians had been targeted. Ministry spokesman Enayat Khowarazm said the Pakistani army bombed Barmal district, in which a number of children and other civilians were killed and injured.

“The Islamic Emirate of Afghanistan considers this barbaric act to be against all international principles and a clear aggression, and strongly condemns it. The Pakistani side should know that such arbitrary measures are not a solution to any problem,” Khowarazam said.

Speaking to Harici, Khowarazam said that “Islamic Emirate will not leave this cowardly act unanswered. We consider the defense of our territory as our inalienable right.”

Afghan Defense Minister vowed to retaliated Pakistan’s airstrikes that killed 46 people and wounded six others.

This is the second such incident this year in Afghanistan that came just hours as Pakistan’s Special Envoy for Afghanistan Mohammad Sadiq is already in Kabul and met with top Taliban leadership.

Sadiq met with Interior and Foreign Ministries in Kabul, where both sides discussed issues related to the bilateral topics, including security and border issues. Is there any connection between Sadiq’s visit to Kabul and Pakistan’s airstrikes. What message Pakistan wants to deliver to the Taliban leadership at a time when its special envoy is already in Kabul meeting with Taliban leaders. And most importantly, what message will Sadiq leave when he departs Kabul back to Islamabad.

Pakistan apparently failed to handle the TTP issue through diplomatic channels and went to take military action.  

Pakistan has always used two tools against Afghanistan. On the one hand, they proceed with a diplomatic approach, but on the other hand, they have used intelligence to exert pressure. Pakistan’s recent action is a contradiction, but the reality is that the army makes this decision, not the diplomatic system.

Meanwhile, the Taliban’s diplomatic weakness has made the ground favorable for Pakistan’s military intervention and attacks. In order to defend such attacks, it is necessary to form a legitimate and popular system in Afghanistan.

Islamabad’s relations with the Taliban have gone through significant ups and downs in the past three years. During this period, the Pakistani army has repeatedly targeted what they believe to be the positions of the Pakistan’s Taliban TTP in Afghanistan.

The meetings of Pakistan’s special representative Sadiq with Taliban officials in Kabul were encouraging – but the attack of the Pakistani army in Paktika will have a very negative effect on his trip. Such measures are not the solution and both sides should end the tensions through dialogue.

Islamabad has repeatedly warned about the presence and use of TTP in Afghanistan against Pakistan’s security and has continuously emphasized that they have provided the Taliban with the necessary evidence that TTP is planning attacks from Afghanistan.

Now, however, it is believed that Pakistan is trying to impose diplomacy to force the Taliban to act against the TTP in Afghanistan, but the Taliban have always denied the presence and activities of the TTP inside Afghanistan.

Increasing attacks in Pakistan by TTP fighters since Taliban takeover

Pakistan has repeatedly accused the Taliban government for harboring TTP, and also Islamabad claims that they carried out enormous cross-border attacks targeting security forces.

Last week, TTP claimed responsibility for killing at least 16 Pakistani forces in South Waziristan. After the attack, the Pakistan army said that TTP conducts its operation from Afghan sanctuaries, and the claim comes when the Taliban deny providing refuge to the TTP fighters.

During his briefing at the UNSC meeting last week, Usman Iqbal Jadoon said that thousands of TTP fighters have sought shelter in Afghanistan.

“The TTP, with 6,000 fighters, is the largest listed terrorist organisation operating in Afghanistan. With safe havens close to our border, it poses a direct and daily threat to Pakistan’s security,” Jadoon said at the UN briefing.

North Waziristan, a region bordering Paktika, where Pakistan conducted airstrikes against TTP fighters, has historically been a stronghold for different militant groups.

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