Pakistan this week secured a new $7 billion loan from the International Monetary Fund (IMF) aimed at helping the South Asian nation stabilize its ailing economy.
But the country now faces challenging budget targets it has pledged to the IMF under the loan deal.
Kristalina Georgieva, the head of the IMF said the new bailout package approved for Pakistan is aimed at assisting the government in economic recovery and reduction in inflation along with employment creation and inclusive growth.
“Very productive meeting with Pakistani Prime Minister Shehbaz Sharif!” she wrote on her X account.
“We discussed Pakistan's new Fund-supported program helping ongoing recovery, disinflation, increased tax fairness, and reforms to create new jobs and inclusive growth,” the top IMF official said, referring to her meeting with the PM.
Georgieva’s remarks came after the IMF’s Executive Board has approved a $7 billion loan for Pakistan under the Expanded Fund Facility (EFF).
The loan — which Islamabad will receive in installments over 37 months — came after the Pakistani government’s commitment to implementing the agreed-upon reforms.
Last Thursday, the global lender said its immediate disbursement to Pakistan will be about $1 billion.
The office of the Pakistani PM said later the immediate release will be about $1.1 billion.
Assurances
The significant financing assurances provided by Saudi Arabia, UAE and China have facilitated the IMF's approval of the new loan.
IMF Pakistan Mission Chief Nathan Porter declined to provide details of additional financing amounts committed by the three countries but said they would come on top of the debt rollover.
Sharif, on the sidelines of the United Nations General Assembly, told Pakistani media that the country had fulfilled all of the lender’s conditions, with help from China and Saudi Arabia.
“Without their support, this would not have been possible,” he said, without elaborating on what assistance Beijing and Riyadh had provided to get the deal over the line.
Challenging targets
The South Asian country has set challenging revenue targets in its annual budget to help it win approval from the IMF for a loan to stave off another economic meltdown, even as domestic anger rises at new taxation measures.
Pakistan has set a tax revenue target of 13 trillion rupees ($47 billion) for the fiscal year that began on July 1, a near-40% jump from the prior year, and a sharp drop in its fiscal deficit to 5.9% of gross domestic product from 7.4% the previous year.
Minister of State for Finance, Revenue and Power Ali Pervaiz Malik said earlier that the point of pushing out a tough and unpopular budget was to use it a stepping stone for an IMF program, adding the lender was satisfied with the revenue measures taken, based on their talks.
“Obviously they (budget reforms) are burdensome for the local economy but the IMF program is all about stabilization,” Malik said.
Pakistan’s trade deficit decreased by 12.3% in FY2024, dropping to $24.09 billion from $27.47 billion in FY23, according to data released by the Pakistan Bureau of Statistics (PBS).
The Pakistani Geo News website stated that during July 2023-June 2024, total exports, however, saw an increase of 10.54%, reaching $30.645 billion, while imports shrank by 0.84%, amounting to $54.73 billion.
In June 2024, exports of Pakistani products abroad increased by 7.3% to $2.529 billion compared to $2.356 billion in the same period last year, marking the tenth consecutive monthly rise in exports, it added.
In a statement last Thursday, the IMF praised Pakistan for taking key steps to restore economic stability. Growth has rebounded, inflation has fallen to single digits, and a calm foreign exchange market have allowed the rebuilding of reserve buffers.
But it also criticized authorities. The IMF warned that, despite the progress, Pakistan’s vulnerabilities and structural challenges remained formidable.
