Islamabad, Pakistan (CU)_ The International Monetary Fund (IMF) stated that it has reached an agreement with Pakistan to relaunch a previously banned loan program that will provide $1.17 billion to the grappling economy. According to an IMF statement, a staff level agreement, which is awaiting board approval, will raise the total amount disbursed under an extended fund facility (EFF) to $4.2 billion, which may climb to $7 billion and last until June of next year.
Imran Khan, the former prime minister of Pakistan, signed an original $6 billion bailout plan in 2019, but it was frequently delayed as his administration violated subsidy agreements and failed to significantly boost tax collection. The new accord follows months of extremely unpopular austerity measures implemented by the administration of Shehbaz Sharif, which has successfully removed gasoline subsidies and enacted additional measures to increase the tax base since taking office in April.
According to Nathan Porter, who led the IMF team, “Pakistan is at a challenging economic juncture”. He added that foreign forces and internal policies were to blame. To satisfy the demands of global financial institutions, the new administration has reduced a slew of subsidies, risking the ire of an electorate already struggling under the pressure of double-digit inflation.
According to the new coalition administration, which took office after Khan was ousted by a vote of no confidence in parliament, it vowed to make difficult decisions necessary to boost the economy. In an effort to obtain a loan from the International Monetary Fund, Prime Minister Sharif has enforced three gasoline price increases totaling 50 percent and increased the cost of electricity to effectively remove the subsidies instituted by his predecessor, Khan.
Islamabad has been granted $3 billion from the program thus far, but with the facility set to expire later this year, officials are attempting to extend it until June 2023. According to finance minister Miftah Ismail’s statement in the national assembly last month, “It became essential to resume the IMF programme to save the country from default”. He added, “We knew it would damage our political reputation, but still we did it.”
The most recent budget has allocated 3.95 trillion rupees ($18.8 billion) to cover the country’s huge $128 billion debt. According to the statement from IMF’s Porter, agreed policy priorities include steady execution of the budget. Pakistan also pledged to continue reforms in the energy sector, implement a proactive monetary strategy to combat inflation, strengthen governance, fight corruption, and enhance the social safety net. The statement said, “The authorities should nonetheless stand ready to take any additional measures necessary to meet program objectives, given the elevated uncertainty in the global economy and financial markets”.
