Pakistan secures new $7 billion loan deal with IMF to stabilize economy and address debts

Pakistan Secures $7 Billion Loan Deal with IMF to Stabilize Economy

In a move aimed at bolstering its economy and tackling its mounting debts, Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) for a new $7 billion loan deal.

The IMF announced the agreement on Friday, highlighting that the loan will last for 37 months and focus on strengthening fiscal and monetary policy, as well as implementing reforms to broaden the tax base, improve the management of state-owned enterprises, and enhance social protection programs.

Finance Minister Muhammad Aurangzeb, who has been at the forefront of negotiations with the IMF, stated that the government plans to seek a long-term loan to stabilize the economy following the conclusion of the current bailout package.

Nathan Porter, IMF’s mission chief to Pakistan, emphasized that the program aims to build on the macroeconomic stability achieved over the past year by addressing inflation, bolstering public finances, and spurring private sector-led growth.

The agreement is now pending approval by the IMF’s executive board, but the Pakistani government has already taken steps to demonstrate its commitment to economic reform. In its recent budget presentation, the government pledged to increase the salaries of government employees by up to 25% and set an ambitious tax collection target of 13 trillion rupees ($44 billion).

Analysts believe that the new budget, which amounts to around $68 billion, is designed to meet the criteria for securing a long-term IMF loan of $6 billion to $8 billion. The loan will be crucial for stabilizing Pakistan’s economy, which faced a near-default on foreign debt payments in 2023.

With the new loan deal in place, Pakistan is poised to address its economic challenges and pave the way for sustainable growth in the years to come.