Pakistan, which is facing serious economic crisis and severe shortage of foreign exchange reserves, has made a big and shocking proposal to America. After allegedly playing the role of mediation or ‘brokerage’ during the recent tension and conflict between Iran and America, Pakistan has now demanded huge financial assistance of 10 billion dollars from the Trump administration.
This demand has been made under ‘Bilateral Exchange Stabilization Support Facility’. Pakistan believes that if this proposal is approved then its economy which is facing serious economic challenges can get great relief. According to sources, Pakistan has put this request before US Treasury Secretary Scott Besant. However, till now no official approval or positive indication has been received from America on this proposal.
Pakistan’s activism amid US-Iran tension
During the increased tension between Iran and America in recent months, Pakistan tried to present itself as a potential mediator. Pakistan hopes that in return for this role it can get economic support from America and other international financial institutions. This arrangement has been proposed for up to five years.
What is ‘Bilateral Exchange Stabilization Support Facility’?
This is a financial arrangement under which the US provides assistance such as dollars, currency swaps or financial guarantees to strengthen the foreign exchange reserves of an ally country. If Pakistan gets this facility, it will be a big relief for it.
- Foreign exchange reserves may increase.
- The pressure on Pakistani rupee may reduce.
- There may be ease in import payments and repayment of external debts.
- Dependence on international financial institutions may reduce to some extent.
Why is Pakistan’s economy in crisis?
Pakistan is currently facing serious economic challenges. The country is still implementing economic reforms under the IMF’s $7 billion bailout program. Under the terms of this program, the government has had to take many difficult decisions like increasing taxes, reducing subsidies and cutting government expenditure. These steps have had a direct impact on the general public. Criticism of the government is continuously increasing regarding inflation, unemployment and rising cost of living.
Expectations from IMF and World Bank also
Pakistan hopes that if AGP gets the support of America, it will be easier for it to get additional economic assistance from the World Bank, IMF and other international financial institutions. This may provide some relief to the financial situation of the country.
Will America provide help?
At present, there has been no official response from the US on this demand of Pakistan. In such a situation, it is not clear whether the Trump administration will consider this proposal or not. If the US approves such assistance, then it may provide short-term relief to Pakistan’s economic condition. If this proposal is rejected, then Pakistan may have to depend more on IMF and other global institutions to deal with its economic challenges.
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