FILE PHOTO: Men reach out to buy subsidized flour sacks from a truck in Karachi, Pakistan on January 10, 2023. REUTERS/Akhtar Soomro
WASHINGTON, United States — The IMF said Tuesday it has reached agreement with Pakistan on a new $1.3 billion loan program and reviewed an existing bailout that would, if approved, unlock an additional $1 billion.
The new 28-month deal would support Pakistan’s efforts to mitigate and adapt to climate change, the International Monetary Fund said in a statement announcing its decision.
Both the new program and the loan review require approval from the Fund’s executive board, which is largely a rubber-stamping exercise.
Pakistan came to the brink of default in 2023, as a political crisis compounded an economic downturn and drove the nation’s debt burden to terminal levels.
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It was saved by a $7 billion bailout from the IMF and has enjoyed a degree of recovery, with inflation easing and foreign exchange reserves increasing.
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‘Stern’ conditions
But the deal — Pakistan’s 24th since 1958 — came with stern conditions that the country improve income tax revenue and cut popular power subsidies, cushioning costs of the inefficient sector.
On Tuesday, the IMF said the Pakistani authorities remained “committed to advancing a gradual fiscal consolidation to sustainably reduce public debt,” along with tight monetary policy, cost-cutting measures and reforms, as they agreed in principle to the second review of the existing 37-month program.
Assuming the agreement is approved by the Fund’s executive board, the Pakistani authorities will get access to fresh funds worth around $1 billion.
That would bring the total disbursements under the existing program to around $2 billion, the Fund said.
“Over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment,” IMF mission chief Nathan Porter said in a statement.
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