In the middle of 2022, after what seemed like an eternity, the government finally explained why it had been so reluctant to establish rules to oversee domestic crypto operations; after all, crypto is a notion that, by its very nature, transcends borders and jurisdictions. Since other countries did little to stop the spread of cryptocurrency, the RBI’s efforts to restrict it were futile.

Therefore, it was necessary to start with a worldwide conversation about crypto and its associated dangers. It is therefore likely to the credit of the government – and the RBI’s – that tangible progress has been achieved on the international stage in the crypto area, with India using its G20 Presidency to compel a conversation on the subject in an effort to obtain some type of consensus on minimal regulations.

With the G20 Leaders’ Summit happening on September 9-10 in New Delhi, Moneycontrol provides insight into what has been accomplished, the current state of discussions, and what is ahead.

Regardless of the outcome of the Leaders’ Summit in September, India’s most significant contribution to the global crypto industry may have been the country’s outspoken criticism of cryptocurrencies.

Up until this past year, most of the work being done on a global scale was focused on reducing threats to the financial system. Economic Affairs Secretary Ajay Seth remarked on July 18 in Gandhinagar, during a meeting of G20 Finance Ministers and Central Bank Governors, that “the Indian Presidency brought the focus on macroeconomic risks.”

Clearly, the RBI is pleased, and Governor Shaktikanta Das is especially pleased that countries and multilateral organisations have largely come around to agree with what the Indian central bank has been saying “for more than one year about the macro-financial and stability implications, and the huge risks involved in cryptocurrencies.”

To be honest, the RBI’s warnings about cryptocurrency go back further than the past couple of years. In fact, it’s been doing that for about a decade. Specifically, it issued a public alert about the “potential financial, operational, legal, customer protection, and security-related risks” associated with cryptocurrencies like Bitcoin.

Is India’s campaign to warn the world’s largest countries about the dangers of cryptocurrencies having an impact? Certainly, the governor of the Reserve Bank of India (RBI) revealed in February that some G20 members thought a total ban on crypto should be explored.

Body of literature

Multilateral agencies’ activity is a crucial component of the G20’s discussions on crypto.

In February, the International Monetary Fund (IMF) released a note for the G20 regarding the macroeconomic implications of crypto assets. This was followed by recommendations from the Financial Stability Board (FSB) concerning the regulation, supervision, and governance of crypto-asset activities and markets, as well as “global stablecoin arrangements.”

The Bank for International Settlements (BIS) has also submitted a report detailing the ecosystem’s main components and associated risks.

The Indian Presidency’s crypto guidance note, which was presented and deliberated at a meeting of Finance Ministers and Central Bank Governors in Gandhinagar earlier this month, brings everything together.

What remains are the two most essential documents: a joint IMF-FSB paper on synthesis and another on the way forward.

“The thinking is that there should be a bare minimum – two high-level recommendations have stated that there should be a bare minimum; beyond that, if any jurisdiction wishes to be more stringent based on its own circumstances, it should do so. Seth told reporters in Gandhinagar that nobody should fall below the essential minimum.

At the Leaders’ Summit, both the synthesis paper and the roadmap document will be discussed.

What next?

Of course, no one can predict with any certainty what will occur during the Leaders’ Summit in September.

It’s going to be extremely hard for me to speculate at this point as to what type of restrictions they talk about unless the conversations reach some kind of crystal-clear thinking. Finance Minister Nirmala Sitharaman remarked on July 18 that they would have to wait until the next meeting, the Summit, and after the Summit, when they travelled to Marrakesh.

From October 9-15, the annual conference of the World Bank Group and the International Monetary Fund will be held in the Moroccan city of Marrakesh.

In any case, India has great hopes that the Leaders’ Summit will produce some form of conclusion on crypto. This “outcome” might be anything from public acknowledgement and gratitude for the Indian Presidency’s efforts to the formal establishment of a plan of action.

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If that plan proves useful, it can be passed on to the next administration along with the question of whether or not to implement new regulations or use an existing model. Moneypoise, citing a source familiar with the talks, said on July 16 that “if there is a template, it should be about who does what, the implementation and legislative requirements, et cetera.”

India is not doomed if policymakers there are unable to agree on a framework for regulating cryptocurrencies or a timetable for putting it into effect. After all, “deliverables” and “deals” are not what the G20 forum is about.

In Gandhinagar, Seth had observed, “It is about building institutions and taking the discourse forward.” Unquestionably, India has advanced the crypto discussion.

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The International Monetary Fund (IMF) revised its growth prediction for India upwards on July 25, attributing the change to the country’s “stronger domestic investment.” The study was released as part of the IMF’s update to its World Economic Outlook (WEO).

On May 31st, data showed that India’s GDP growth for the first quarter of 2023 jumped to 6.1%, easily surpassing all predictions and prompting the statistics ministry to increase its projection for growth in 2022-23 by 20 basis points to 7.25%.

A percentage point is expressed as a decimal, while a basis point is a tenth of a percentage point.

The International Monetary Fund raised its growth forecast for India on July 25, reversing its judgement from April, when it had lowered the outlook for 2023-24 by 20 basis points to 5.9 percent.

Despite the U-turn, the IMF remains less optimistic about India than the government and the Reserve Bank of India (RBI), which both forecast 6.5% GDP growth for 2023-24. As a result, the IMF’s projections are more in line with those of some private sector economists, who see India’s growth slowing sharply to under 6 percent this year due to weakening global growth prospects as a result of the rapid tightening of monetary policy by central banks around the world to rein in high inflation.

The new president of the World Bank, Ajay Banga, has also endorsed India’s economic story, saying that he is “more optimistic about India today as a whole than I have been in a long time” at a G20 conference of finance ministers and central bank governors held earlier this month in Gandhinagar.

The International Monetary Fund’s prediction that India’s GDP will expand by 6.3% in 2024-25 remains unchanged.

Global projections

The IMF’s fresh stance on the global economy is reflected in its revised growth prediction for India, which now projects growth of 3.3 percent in 2023, up from 2.8 percent in April.

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Most countries have realised the macroeconomic risks and other challenges associated with cryptocurrencies, at least three individuals with direct knowledge of the matter said on condition of anonymity, sharing insights from and details of discussions at the third meeting of the G20 Finance Ministers and Central Bank Governors (FMCBG) held in Gandhinagar last week.

“Many countries are also concerned about the recent collapse of cryptocurrency exchanges and the risks of cryptocurrencies being used for drug trafficking, terror financing, and money laundering,” said one of them. FTX, the second-largest cryptocurrency exchange in the world, failed in November 2022, affecting over one million investors.

A second person stated that specialists will evaluate the financial and macroeconomic risks associated with cryptocurrencies and make recommendations on how to mitigate them before the G20 considers the matter. He added that the International Monetary Fund (IMF) and the Financial Stability Board (FSB) are analysing crypto-related issues and will submit a “synthesis paper” on the subject later this year. The approach to synthesis will encompass two general aspects: crypto regulations and financial stability.

Several nations’ perspectives on cryptocurrencies have shifted significantly, according to the initial speaker. “Now, the majority of them share RBI’s [Reserve Bank of India] concerns regarding the financial and other dangers associated with cryptocurrencies. This topic was discussed in considerable depth at the third G20 FMCBG meeting,” he said.

The issue was mentioned in the outcome document and chair summary of the third G20 FMCBG meeting held on July 18: “We look forward to receiving the IMF-FSB Synthesis Paper, including a Roadmap, before the Leaders’ Summit in September 2023, to support a coordinated and comprehensive policy and regulatory framework taking into account the full range of risks, and risks specific to emerging market and developing economies (EMDEs), and ongoing global implementation of FATF standards.”

Two recent reports on cryptocurrencies presented to the G20 FMCBG at its July meeting – one by the Financial Stability Board (FSB) and the other by the Bank for International Settlements (BIS) – reportedly highlighted the need to develop a robust regulatory mechanism that would also address macroeconomic risks.

The members endorsed the FSB’s high-level recommendations for the regulation, supervision, and oversight of crypto-asset activities at the meeting, according to the first individual quoted. “Risks associated with crypto-assets were not discussed,” he said. The recommendations “do not comprehensively cover all specific risk categories related to crypto-asset activities, such as: AML/CFT [anti-money laundering/combating the financial terrorism]; data privacy; cyber security; consumer and investor protection; market integrity; competition policy; taxation; monetary policy; monetary sovereignty and other macroeconomic concerns,” according to the FSB.

The G20 FMCBG also welcomed the BIS report titled ‘The Crypto Ecosystem: Key Elements and Risks’, which examines the crypto ecosystem’s key elements, evaluates its structural defects, and identifies the risks it poses. The report concludes that “crypto has thus far failed to leverage innovation for the benefit of society” and that “crypto’s inherent structural flaws render it unfit to play a significant role in the monetary system.”

“Crypto remains predominantly self-referential and does not fund actual economic activity. It has inherent flaws in terms of stability and efficacy, as well as accountability and honesty. These structural flaws are the consequence of incentives’ underlying economics rather than technological limitations, according to the BIS report.

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While the Reserve Bank of India (RBI) has already expressed concern over the negative impact of cryptocurrencies on the Indian economy, the Union government believes that a unilateral ban or regulation would be ineffective due to the borderless nature of cryptocurrencies, and that international cooperation is necessary to prevent regulatory arbitrage.

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Pakistan requires another International Monetary Fund (IMF) programme and assistance from other multilateral lenders beyond the impending election cycle and the current standby agreement, the lender stated in a report released on Tuesday, according to Dawn.

“Resolving Pakistan’s structural challenges, including long-term BOP [balance of payments] pressures, will require continued adjustment and creditor support beyond the current programme period,” stated the Fund in a 120-page report analysing Pakistan’s macroeconomic outlook.

Dawn reported that the assessment is based on the Memorandum of Economic and Fiscal Policies (MEFP), which was signed by Finance Minister Ishaq Dar and State Bank Governor Jameel Ahmed.

Dawn is one of the Pakistani dailies that reports on the country’s Social, Political, and Economic issues.

The report states, “A potential successor arrangement could help anchor the policy adjustment required to restore Pakistan’s medium-term viability and ability to repay.”

“Difficult obstacles”

According to the IMF assessment, Pakistan’s economic challenges are complex and multifarious, and the associated risks are exceptionally high.

“Tackling them necessitates consistent implementation of agreed-upon policies and ongoing financial support from external partners. Consistent and decisive implementation of programme agreements will be crucial for mitigating risks and preserving macroeconomic stability, according to the report.

The lender insists that an additional IMF programme will be required to address structural problems. According to the report, the government has agreed to notify the public whenever electricity rates increase by 5 Pakistan Rupees (PKR) per unit and petrol prices increase by more than 40 percent. According to Dawn, this is because circular debt in the gas sector is now competing with losses in the power sector.

Dawn reported that the government has promised to renegotiate power-purchase agreements with the remaining power producers (including the Chinese) or extend their debt servicing terms.

In the gas sector, the government has committed to providing prompt notification of gas tariff adjustments determined by Ogra, in addition to combining the gas rates for both domestic and imported natural gas using a weighted average tariff.

The government has also pledged to protect the fiscal programme outlined in the most recent budget and other IMF commitments.

Until the formation of a new government following the elections (except in the case of a severe natural disaster), the government will not sanction supplemental grants for any additional unbudgeted spending above the level approved by parliament for the current fiscal year (except in the case of a severe natural disaster).

The government has also “committed not to introduce any new tax amnesties or grant any new tax exemptions in 2023-24, including through the budget or statutory regulatory orders, without the prior approval of the assembly.”

Dawn reported that the government has reached agreements with each province regarding their commitment to achieving an end-FY24 fiscal position consistent with the fiscal year’s general government primary balance goal of PKR 401 billion and maintaining a focus on critically urgent energy sector policies, including not introducing any fuel subsidies or cross-subsidy schemes in FY23 and beyond.

In addition, the government has pledged to ensure monetary and financial stability by reverting to a market-determined exchange rate, bringing inflation closer to the target rate, and rebuilding foreign exchange reserves.

Dawn reported that the statement said the authorities would refrain from providing market participants with exchange rate guidance or preferences and from regulating the demand for foreign currency through administrative action.

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The authorities have committed to maintaining the average premium between interbank and open market rates at no more than 1.25 percent and no less than minus 1.25 percent during any consecutive five business day period and to publishing daily interbank and open market exchange rates.

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reported by media that the Washington-based fund’s Regional Economic Outlook – Asia and Pacific report stated that the region would contribute around 70% of global growth.

Asia and the Pacific will be the most dynamic of the world’s main regions in 2023, driven primarily by China and India, according to an IMF report.

In addition, the two greatest emerging market economies of the region are anticipated to contribute approximately half of the global growth this year, with the remainder of Asia and the Pacific contributing the remaining fifth.

“Asia’s dynamism will be driven primarily by the recovery in China and resilient growth in India, while the rest of Asia’s growth is expected to bottom out in 2023, in line with other regions,” the report stated.

The IMF predicts that 2023 will be a difficult year for the global economy, with global growth decelerating as the effects of monetary policy tightening (consistent interest rate hikes) and Russia’s conflict in Ukraine continue to weigh on economic activity.

In addition, persistent inflationary pressures and recent financial sector issues in the United States and Europe have injected additional uncertainty into a “already complex economic landscape,” according to the report .

Silicon Valley Bank, one of the most prominent lenders in the world of technology firms, initially failed on March 10 due to a run on the bank by depositors. Monday, First Republic Bank was among the institutions that were forced to close as a result of the contagion caused by its closure.

The collapse of a few regional banks in the United States, which began with Silicon Valley Bank, has sent shockwaves throughout the global banking industry and sparked concerns of an economic contagion.

China’s reopening of its economy after protracted Covid-related restrictions provides a further boost to the Asia-Pacific region’s economic expansion.

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However, the IMF cautioned that policymakers in the region cannot afford to be complacent despite the region’s optimistic outlook.

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The arrangement could serve as a model for addressing the debt issues of middle-income countries, which have been exacerbated in part by rising interest rates in the United States and Europe.

The Japanese Minister of Finance, Shunichi Suzuki, will participate alongside senior officials from India and France. Asia Nikkei predicts that President of Sri Lanka Ranil Wickremesinghe will participate online.

In addition, the International Monetary Fund, the World Bank, and other international organizations, as well as the private sector, will participate in the discussions regarding debt restructuring. The parties involved will coordinate the first meeting’s date and time.

After the coronavirus pandemic all but halted global travel, Sri Lanka’s primary source of income, tourism, plummeted. Incapable of repaying borrowed infrastructure funds from China and other nations, the nation defaulted in May of last year.

Asia Nikkei reports that China held 52% of Sri Lanka’s bilateral debt in June of last year. Japan was the second greatest creditor with a 20% share, followed by India with 12% and France with 3%.

Asia Nikkei reported that China has resisted reducing or canceling Sri Lanka’s debt. The debt restructuring has consequently been delayed. However, China did provide assurances in March that it would work out a debt solution for Sri Lanka in the coming months, allowing the South Asian island to secure a vital USD 2.9 billion bailout from the IMF. China’s participation or non-participation in the multilateral discussions is currently the central issue.

In 2020, the Group of 20, comprised of industrialized and emerging-market nations, established a common framework to resolve the debt issues of emerging economies. According to Asia Nikkei, only low-income countries are eligible for partial debt remission under the leadership of the IMF and other organizations.

Today’s high prices, caused by the pandemic and Russia’s invasion of Ukraine, are causing emerging economies severe pain. According to the World Bank, emerging economies will have an external debt of $9 trillion by the end of 2021, which is more than double what it was ten years prior.

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The debt crisis has spread beyond low-income countries, with Sri Lanka becoming the first middle-income country to default since the coronavirus outbreak. According to Asia Nikkei, if Sri Lanka’s default is resolved utilizing the new framework, it could serve as a template for future debt restructuring.

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IMF division chief Daniel Leigh  stated that India is currently one of the global economy’s bright areas due to its high growth rate.

Yes, the projected growth rate for India in 2022 is 6.8 percent. Let us not overlook that this is currently one of the bright spots in the global economy. Such a high growth rate is moderating down to 5.9 with a -.2 revision compared to January; what is occurring here is a series of historical revisions, according to Leigh.

IMF on Tuesday lowered its growth projection for 2023-24 to 5.9% from 6.1% previously, but despite a significant decline, India remains the fastest-growing economy in the world, according to the World Economic Outlook.

“We recognize that 2020-2021 has been significantly better than anticipated, so there is less room to catch up. And as a result, the pent-up demand from consumers that informed our previous forecast will be lower because they’ve had more time to catch up in the past. This is the reason for the downward revision this year. Then we rise to 6.3% again the following year, a very robust economy that is necessary for India to continue to converge towards higher living standards and create the necessary employment, added leigh.

The IMF forecasts that India’s inflation will decrease to 4.9% this fiscal year and to 4.4% the following year.

The IMF’s development forecast is lower than that of the Reserve Bank of India (RBI). The central bank predicted 7% GDP growth for FY 2022-23 and 6.4% for the current fiscal year, which began on April 1.

In the meantime, the international lender expressed concern over inflation, debt, and the threats posed by rising interest rates to the financial sector. It warned that if banks reduce lending further, global output will decrease by an additional 0.3% in 2023.

“Despite the boost from lower food and energy prices and improved supply-chain functioning, downside risks are substantial as a result of the recent turmoil in the financial sector,” the report states.

The IMF forecasts that growth will level out at 2.8% in 2023 before rising to 3% in 2024. For the remainder of the year, inflation is projected to remain elevated at 7%, before declining to 4.9% the following year.

In 2023 and 2024, China’s growth rate is projected to be 5.2% and 4.5%, respectively, compared to its growth rate of 3% in 2022.

Growth projections for 2023 are 1.6% for the United States, 0.7% for France, and a dismal -0.1% and -0.7% for Germany and the United Kingdom, respectively.

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Despite the lingering COVID pandemic and constricting financial conditions caused by the ongoing Russia-Ukraine conflict, the majority of nations will avoid recession in 2023.

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India has developed a world-class digital public infrastructure (DPI) to support its sustainable development goals, the IMF stated in a working paper, noting that digitalization has facilitated the formalization of India’s economy and Aadhaar has facilitated the direct transfer of payments to beneficiaries while reducing leakages.

According to the working paper “Stacking up the Benefits: Lessons from India’s Digital Journey,” the government acted as an anchor client and established institutions to assure the continuity of India Stack’s operations.

India's Tax agency plays key role in promoting adoption of digital public infrastructure initiatives: IMF

Read @ANI Story | https://t.co/sy520S1KiL#India #IMF #DPI pic.twitter.com/kgLADVceUZ

— ANI Digital (@ani_digital) April 6, 2023

Using this digital infrastructure, India was able to rapidly provide aid to an impressive number of impoverished households during the COVID-19 pandemic, according to the report.

Using a digital backbone enabled India to rapidly scale its vaccine delivery and surmount obstacles such as large-scale internal migration, according to the paper. CoWIN, a digital platform developed by India to capture the Covid-19 vaccination program, has been implemented in Indonesia, the Philippines, Sri Lanka, and Jamaica to facilitate their vaccination programs.

The paper praised the Narendra Modi government’s Pradhan Mantri Jan Dhan Yojana (PMJDY) and stated that sound policies led to a competitive, open, and affordable telecommunications market, and that the 90 percent reduction in the cost of mobile data led to an increase in data consumption.

According to the study, demonetization increased the use of alternative payment methods, including the UPI.

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The International Monetary Fund (IMF) approved a three-billion-dollar loan to Sri Lanka to help the country promptly overcome its economic crisis. According to a statement, the IMF’s Executive Board authorised a 48-month extension of the Extended Fund Facility (EFF) in the amount of 2,286 billion SDR (395 percent of quota or about 3 billion USD).

Sri Lanka has been severely impacted by a devastating economic and humanitarian crisis. In a statement approving the bailout, the IMF stated that the economy faces significant challenges stemming from pre-existing vulnerabilities and policy missteps prior to the crisis, which have been exacerbated by a succession of external shocks.

The statement added that the EFF-supported programme intends to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, protect the stability of the financial sector, and enhance governance and growth potential. The decision of the Executive Board will permit an immediate disbursement of SDR 254 million (approximately USD 333 million) and stimulate financial support from other development partners.

Notably, Sri Lanka declared its first-ever debt default in April, as the economic crisis sparked by foreign exchange shortages since the country’s 1948 independence from Britain sparked public protests.

Monday, the International Monetary Fund (IMF) announced that the IMF Executive Board had approved Sri Lanka’s Extended Fund Facility programme. (EFF). According to Sri Lanka’s President’s Media Division, the programme will enable Sri Lanka to obtain up to $7 billion in financing from the IMF, International Financial Institutions (IFIs), and multilateral organisations.

The International Monetary Fund (IMF) has announced that its Executive Board has approved Sri Lanka’s Extended Fund Facility (EFF) programme. (EFF). The programme will enable Sri Lanka to access up to $7 billion in financing from the IMF and other international financial institutions (IFIs)…

Several hours after the announcement, President Ranil Wickremesinghe of Sri Lanka thanked the International Monetary Fund. (IMF).

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“I applaud the IMF for approving Sri Lanka’s Extended Fund Facility programme. We are committed to complete transparency in our efforts to reach debt levels that are sustainable and in our reform agenda. The IMF programme is essential to attaining this vision, according to the Sri Lankan president.

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Pakistan and the International Monetary Fund will resume online talks the following week, it was announced on Friday, after ten days of face-to-face discussions on how to keep the country afloat in Islamabad ended without an agreement.

The objective of the IMF talks is to release at least $1.1 billion in stalled funding as part of a $6.5 billion bailout agreement signed in 2019 for the nuclear-armed nation.

Finance Minister Ishaq Dar informed reporters that Pakistan and the IMF had reached an agreement on the conditions for releasing the funds, which had been delayed since December of last year.

He added that negotiations would resume virtually on Monday, citing “routine procedures” for the delay. Dar stated, “We will implement whatever was agreed upon between our teams.”

In a statement, Pakistan IMF Mission Chief Nathan Porter confirmed that negotiations were ongoing and that substantial progress had been made. However, the hold-up caused the price of the nation’s government bonds to plummet once more.

Pakistan is in desperate need of a favourable outcome. The $350 billion economy is still reeling from last year’s devastating floods, which the government estimates will cost $16 billion to rebuild.

The heavily indebted nation has insufficient foreign reserves to cover vital imports for more than three weeks. The longer it takes for the IMF tranche to be paid out, analysts say, the greater the risk of default, especially with upcoming elections.

Premier Shahbaz Sharif described Pakistan’s economic situation as “unimaginable” last week.

Khaqan Najeeb, a former finance ministry adviser, told Reuters that Pakistan should have reached a staff level agreement at the conclusion of the IMF mission.

“Delay is inadmissible.”

IMF MEASURES

Prior to the disbursement of funds, the so-called staff-level agreement, which must be approved by the IMF’s headquarters in Washington, must be reached.

In addition to the stalled tranche, another $1.4 billion remains of the June-terminating $6.5 billion bailout programme.

According to experts, Pakistan requires the payment as soon as possible. Murtaza Syed, a former central bank deputy governor, told Reuters, “if this goes on for more than a month, things will become more difficult because our foreign exchange reserves are at a critical level.”

The IMF’s conditions include a return to a market-based exchange rate and higher fuel prices, measures that Pakistan recently implemented and which have already pushed inflation to an all-time high of 27.5% year-over-year in January and caused shortages of some imported goods.

Dar stated that Pakistan had also agreed with the IMF to implement fiscal measures, such as the imposition of new taxes.

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Analysts are concerned that additional fiscal austerity could worsen the economic crisis.

Sakib Sherani, who served as the finance ministry’s chief economic adviser in 2009-2010, stated, “The government has not only wasted over five months in realising the gravity of the situation, but it is still sleepwalking the nation into an economic abyss.”

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