In a major development, Pakistan has finalized a new extended loan program worth $7 billion with the International Monetary Fund (IMF). Spread over 37 months, this agreement aims to provide much needed support to stabilize the South Asian nation’s struggling economy.
After extensive discussions between IMF team led by Mission Chief Nathan Porter and Pakistani authorities in Islamabad earlier this month, a staff-level deal has been reached. Subject to approval from IMF Executive Board, this new Extended Fund Facility (EFF) builds upon the gains of last year’s emergency bailout.
As per IMF statement, the objectives of the 37-month long program include strengthening public finances, lowering inflation, rebuilding foreign reserves and removing barriers to private sector growth. To this effect, tax revenues are expected to rise by 1.5% of GDP in fiscal 2025 and 3% over the entire tenure through fair direct and indirect taxes.
Both federal and provincial governments have committed to rationalize spending while increasing tax collection efforts at provincial level, especially in sales and agricultural income taxes. Continued cooperation from Pakistan’s development partners is also deemed critical.
The economic stabilization measures under previous IMF support program have started bearing fruits. This new arrangement aims to capitalize on the hard-won macroeconomic stability through reforms like improving SOEs, enhancing competition and creating an enabling environment for investments.
If approved, the planned USD 7 billion package will provide much needed liquidity for Pakistan that is struggling with high debt levels and balance of payment issues. It is expected to help the country put its finances on a sustainable footing and lay the foundation for stronger and inclusive growth going forward.
