Rental economy of Pakistan,

Yalniz Kurt Blogs.

Rana Mohsin Ali

29 April, 2023.

Pakistan relies on the rental economy and its aftershocks.

From the day Pakistan came into being to today, Pakistan always relies on the rental economy. First, we have to be clear about the rental economy. The rental economy is a term that means that rely on foreign aid and loans and not rely on their own resources. Countries like Pakistan they always run their economy on American and foreign aid and by getting loans from IMF and other countries like China, Saudi Arabia, and UAE. This kind of economic policy has many bad impacts on Pakistan.

When did Pakistan start relying on the rental economy?

In 1958, for the first time, Pakistan went to IMF for a bailout. For this, IMF lent out US$25,000,000 [originally the loan amount is given in SDR; for this article, it is considered to be 1SDR = 1USD] to Pakistan on a standby arrangement basis on 8 December 195.

It’s been a great history of Pakistan getting loans and financial aid from other countries let’s have a look on the history of loans in the eras of dictatorship.

Ayyub khan era

In the martial law era of Ayyub Khan started Pakistan also went to get US aid and Pakistan promise the US that we can help the US in the cold war against USSR (soviet union).In the 1960s and 1970s, the United States was a major donor for the construction of the Mangla and Tarbela dams, which at the time of their completion accounted for 70 percent of the country’s power output. In the 1980s and early 1990s, the United States helped build the Guddu Power Station in Sindh and the Lahore University for Management Sciences, which is now considered to be one of the nation’s top business schools.

Zia ul Haq’s era

And also, in the martial law era of Zia ul haq, the USSR attacked Afghanistan in 1978. Americans agreed with the establishment of Pakistan to support the Americans in the proxy war against USSR in Afghanistan. The U.S. offered two packages of economic assistance and military sales to support Pakistan's role in the war against the Soviet troops in Afghanistan. The first six-year assistance package (1981–87) amounted to US$3.2 billion, equally divided between economic assistance and military sales.

Parvez Musharraf’s era

Also in the era of Pervez Musharraf US give a lot of aid to Pakistan Financial aid to Pakistan since the 11 September 2001 attacks. Between 2002 and 2011, US Congress approved $18 billion in military and economic aid from the United States.

This graph shows you how much aid Pakistan got in different time periods.

Percentage of Pakistan’s loans from IMF.

Pakistan and IMF.

Pakistan has been a member of the International Monetary Fund (IMF) since 1950. Due to the unpredictable nature of its economy and its dependence on imports, the IMF has provided loans to Pakistan on twenty-two occasions, with its most recent being in 2019. Pakistan is the fourth-largest debtor of the IMF, with a total outstanding debt of $7.85bn. The IMF recently lent the country $1.1bn to avert default due to spillovers from the war in Ukraine and domestic challenges including devastating floods, according to the IMF’s August 29 statement.

Total debt that Pakistan has to pay.

As of January 2023, the Public Debt of Pakistan is around PKR 62.46 trillion (USD 274 billion) which is nearly 97 percent of the gross domestic product (GDP) of Pakistan.

The disadvantage of getting too many loans and foreign aid.

• Country is completely relying on foreign aid and loans.

• America manipulates our foreign policy.

• We can't our own foreign policy.

• We are not relying on our own resources.

• It’s also making our economy weak.