IMF Approves $7 Billion Loan for Pakistan Amid Economic Struggles
Pakistan announced on Wednesday that the International Monetary Fund (IMF) has approved a crucial $7 billion loan aimed at helping the country meet its external financing needs.
Pakistani Prime Minister Shehbaz Sharif expressed his satisfaction with the IMF’s decision in a statement, extending his gratitude to IMF Managing Director Kristalina Georgieva and his economic team for their role in negotiating the deal.
The Washington-based IMF is expected to release an official statement soon.
According to local media reports, the IMF has agreed to a 37-month loan arrangement under its Extended Fund Facility, with an immediate disbursement of $1.1 billion.
While attending the United Nations General Assembly in New York, Sharif mentioned to Pakistani media that his government had complied with all the IMF’s conditions. He acknowledged that the loan agreement, initially outlined in July, came with strict requirements.
Sharif credited longstanding allies, including China, Saudi Arabia, and the United Arab Emirates, for their support in finalizing the deal, although he did not go into detail.
Pakistan was required to extend current cash loans worth $5 billion, $4 billion, and $3 billion from Riyadh, Beijing, and Abu Dhabi as part of the IMF’s loan conditions. Additionally, Islamabad committed not to repay more than $12 billion in debts to these three nations, as well as to Kuwait, during the loan period.
This new loan marks Pakistan’s 25th IMF program since gaining independence in 1947, the highest number for any country.
“We are determined to ensure this is the last time we seek financial assistance from the IMF,” Sharif emphasized, though critics have expressed doubts about his pledge.
Experts often cite long-standing issues such as poor economic management, corruption, military takeovers, and the failure of various governments to implement necessary reforms as root causes of Pakistan’s financial woes.
Despite these challenges, Islamabad has previously managed its external financing needs through loans from allies and financial support from the IMF.
Ongoing Economic Challenges
Pakistan’s current economic crisis is described by experts as the longest in its history. Soaring inflation, which reached record highs, had brought the country to the brink of default before an IMF bailout last summer helped avoid a catastrophe.
Since then, inflation has moderated, and Moody’s has upgraded Pakistan’s local and foreign currency ratings, citing improved economic conditions and slightly better liquidity and external positions for the government.
In line with IMF requirements, the Sharif government has intensified efforts to raise tax revenues, although new tax measures and high energy prices have sparked protests from traders and opposition parties.
A report from the Asian Development Bank (ADB) on Wednesday highlighted that Pakistan’s economic recovery hinges on continued reforms. The IMF program is expected to boost macroeconomic stability, strengthen public finances, expand social safety nets, and replenish foreign reserves, among other benefits.
However, the ADB warned that Pakistan faces significant challenges due to ongoing political and institutional tensions. The steep drop in real incomes could lead to further social unrest.
The country’s economic situation has worsened since April 2022, following the ousting of former Prime Minister Imran Khan through a controversial vote of no confidence. Khan’s Pakistan Tehreek-e-Insaf Party continues to protest against the current government, accusing election authorities of rigging the February 8 parliamentary elections. The current administration, led by a coalition supported by the military, denies these allegations.
Some information in this report was provided by Reuters.
