Abstract

A time series data is used to examine “Which Factors Compel Pakistan to Approach the IMF on a Regular Basis” from 1992 to 2021. This study aimed at answering what economic factors lead the country into signing the IMF agreement. In order to determine empirically which economic factors, lead a country to request financial support from the IMF, in addition to whether or not the IMF’s recommendations are sound, this research developed and estimated two models. Obviously, such an analysis faces several challenging empirical issues. These include numerous factors, such as the dichotomous nature of the endogenous variable. The results have shown that economic factors such as GDP growth, higher government expenditure to GDP ratio, lower reserve holdings, larger current account deficits, larger debt servicing to exports ratio and higher imports to exports ratio are some of the key factors to determine whether the country will go for an IMF deal or not. Supply side variables are also significant which means that the tax to GDP ratio, the governance indicator, and the real effective exchange rate have significant and positive effects on GDP and IMF recommendations are good to go with but we need to fix our own problems. Regarding the concerns the Fund makes and the recommendations it provides to ensure that the receiving economy can more effectively use the funds, we find that policy actions to increase tax revenue, decrease government expenditures, decrease imports to exports ratio and adjust the exchange rate are important considerations that will have a positive impact and improve the economy so that it will not require assistance in the way that only a few other nations did.