Pakistan has entered a deal for a fresh $7-billion loan with the International Monetary Fund (IMF), the global lender announced on Saturday (July 13). In exchange for the 37-month loan, the Pakistani government under Prime Minister Shehbaz Sharif pledged to implement more economic reforms that are expected to be unpopular among the Pakistani people.
The loan is the 24th of its kind from the IMF since Pakistan came into being more than six decades after bitter partition from British India. But it is “subject to approval by the IMF’s Executive Board”, the IMF said in a statement.
What does it mean?
The deal’s main aim is to support the Pakistani government’s steps to establish overall macroeconomic stability while creating necessary conditions for growth.
Also watch | IMF warns of challenges ahead for Pak economy
“This includes steps to strengthen fiscal and monetary policy and reforms to broaden the tax base, improve State Owned Enterprises’ (SOE) management, strengthen competition, secure a level playing field for investment, enhance human capital, and scale up social protection through increased generosity,” the statement said.
The deal came after months of negotiations. It is conditional on the basis that Pakistan improve its tax collection system. Only 5.2 million people filed income tax returns in 2022 in a country with some 236 million people.
Around 40 per cent of the Pakistani population already lives below the poverty line. But the World Bank said in April it feared that 10 million additional Pakistanis would fall below this threshold.
Last year, Pakistan was nearing default as its economy was hard hit by political chaos following former prime minister Imran Khan’s imprisonment, the aftermath of huge monsoon floods in 2022, and decades of mismanagement.
Under the programmw, “we need to ensure structural reforms and bring self-sustainability in areas of public finance, energy, and state-owned institutions,” Pakistan’s Finance Minister Muhammad Aurangzeb was quoted by Geo News as saying on July 13.
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