Cash-starved Pakistan acquires $7 billion IMF loan
Written by worldOneFm on July 15, 2024
ISLAMABAD — Pakistan said Saturday that a newly secured multibillion-dollar loan from the International Monetary Fund would help improve the cash-starved country’s macroeconomic stability.
The official reaction came hours after the Washington-based global lender announced its preliminary agreement with Islamabad for a “37-month” loan of about $7 billion under the IMF’s Extended Fund Facility arrangement.
“This agreement is subject to approval by the IMF’s executive board and the timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners,” stated Friday’s announcement by the IMF. It did not mention a date for board action, which typically is a formality before the disbursement of funds.
“The new program aims to support the authorities’ efforts to cement macroeconomic stability and create conditions for a stronger, more inclusive and resilient growth,” said the IMF statement.
On Saturday, Pakistani Prime Minister Shehbaz Sharif shared the news while meeting with his finance team and praised them for negotiating the staff-level agreement.
“The IMF [executive] board will now convene its meeting and will also approve it, God willing,” Sharif said in his televised remarks at a meeting of top finance ministry officials.
He emphasized the importance of timely implementation of economic reforms and structural changes “to improve our macroeconomic indicators … because only then can this be the final IMF program in the country’s history.”
Pakistan’s fiscal year, which started July 1, will see roughly $25 billion in external debt payments, a significantly higher amount than its current level of foreign exchange reserves.
Sharif’s coalition government has implemented several unpopular reforms — such as imposing unprecedentedly high taxes and raising energy costs — to meet IMF requirements and secure the loan, triggering strong public opposition.
Inflation in Pakistan declined from 28% in January to 12% last month, but experts say the rate is still the highest in Asia.
Since gaining independence in 1947, Pakistan has received 23 bailout packages from the IMF, the most of any country. Critics blame chronic financial mismanagement, rampant corruption and repeated military-led dictatorial rules for hindering economic progress in the South Asian nation of more than 240 million people.
“The authorities have also committed to advance anti-corruption as well as governance and transparency reforms, and gradually liberalize trade policy,” Friday’s IMF statement quoted its mission chief to Pakistan, Nathan Porter, as saying.
Pakistan’s finance minister, Muhammad Aurangzeb, has stated that the new IMF loan would unlock investments from other international financial institutions and friendly countries, including Saudi Arabia and the United Arab Emirates.
“Pakistan owes about $8.4 billion to the IMF, to be repaid over the next 3-4 years. The bailout package of $7 billion is less than this amount. There is nothing to celebrate,” Yousuf Nazar, a leading economic commentator and former Citigroup executive, wrote Saturday on social media platform X while commenting on the new IMF deal.
By Ayaz Gul
