[🇵🇰] IMF Program for Pakistan - Updates

Saif · Jul 16, 2024

Pakistan reaches new $7 billion loan deal with IMF

Pakistan has reached a staff-level agreement for a new $7 billion loan deal, the International Monetary Fund said Friday, the country’s latest turn to the global lender for help in propping up its economy and dealing with its debts through big bailouts. Earlier this year, the IMF approved th

thefinancialexpress.com.bd

Pakistan reaches new $7 billion loan deal with IMF
Published :
Jul 13, 2024 19:15
Updated :
Jul 13, 2024 19:15

The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, US, September 4, 2018. Photo : REUTERS/Yuri Gripas/Files

Pakistan has reached a staff-level agreement for a new $7 billion loan deal, the International Monetary Fund said Friday, the country's latest turn to the global lender for help in propping up its economy and dealing with its debts through big bailouts.
Earlier this year, the IMF approved the immediate release of the final $1.1 billion tranche of a $3 billion bailout to Pakistan. Finance Minister Muhammad Aurangzeb said the government planned to seek a long-term loan to help stabilize the economy after the end of that bailout package.

The new loan deal will last for 37 months. It is aimed at strengthening fiscal and monetary policy as well as reforms to broaden the tax base, improve the management of state-owned enterprises, strengthen competition, secure a level playing field for investment, enhance human capital, and scale up social protection through increased generosity and coverage in a major welfare program, the IMF said.

"The program aims to capitalize on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth," said Nathan Porter, IMF's mission chief to Pakistan.

The agreement is subject to approval by the IMF's executive board.

Pakistan's new coalition government presented its first budget in parliament last month, promising an increase of up to 25 per cent in the salaries of government employees and setting an ambitious tax collection target.

The finance minister said Pakistan wants to collect 13 trillion rupees ($44 billion) in taxes, which would be 40 per cent more than in the current fiscal year.

Aurangzeb also said the government will ensure that the number of taxpayers increases. Only about 5 million people in Pakistan pay taxes.

Analysts said the new budget of about $68 billion — up from $50 billion in the last fiscal year — was aimed at qualifying for a long-term IMF loan of $6 billion to $8 billion to help stabilize the economy. Pakistan in 2023 nearly defaulted on the payment of foreign debts.

Lulldapull · Jul 17, 2024

Wow! what a way to run a country. Perpetually in debt.

Ghazi52 · Sep 26, 2024

The Executive Board of the International Monetary Fund (IMF) will convene today in Washington to approve a critical $7 billion loan package for Pakistan, aiming to stabilize the country's fragile economy.

This new bailout program, spanning 37 months, marks Pakistan's 24th IMF assistance package.

With its approval, Pakistan will also be eligible to receive funds from other international organizations and countries.

As per sources, Pakistan is likely to get $1 billion or $1.1 billion as the first instalment of the loan by September 30.

After the approval of the loan program, the second installment will also be received in the same financial year, the sources added.

Ghazi52 · Sep 27, 2024

Ghazi52 · Sep 27, 2024

IMF board approves $7bn Extended Fund Facility for Pakistan: PMO

Anwar Iqbal
September 25, 2024

International Monetary Fund (IMF) logo is seen at the IMF headquarters buiding — Reuters File Photo

https://whatsapp.com/channel/0029VaMc238IiRov8okfYy3n
The International Monetary Fund’s board (IMF) on Wednesday approved a $7 billion Extended Fund Facility (EFF) for Pakistan, providing a critical boost to the country’s struggling economy.

The development was announced by the Prime Minister’s Office (PMO) while a statement is expected from the IMF. The PMO said the premier expressed his satisfaction with the programme’s approval.

“The implementation of economic reforms is going on rapidly,” he said, adding that the government would continue to work hard to achieve goals related to economic development after achieving economic stability.

Ghazi52 · Sep 27, 2024

Primary goals of new deal

The primary goals of the new bailout package include stabilising Pakistan’s economy by consolidating public finances, rebuilding foreign exchange reserves, and reducing fiscal risks from state-owned enterprises. The programme also aims to create a more conducive environment for private-sector-led growth.

The loan deal, finalised in July, was contingent on Pakistan securing $12bn in financial commitments from key allies such as Saudi Arabia, China, and the UAE.

Pakistan secured $5bn in deposits from Saudi Arabia, $4bn from China, and $3bn from the UAE. An additional condition from the IMF required Pakistan to obtain $2bn in external funding from bilateral and commercial sources.

The remaining financing gap of $2-2.5bn was bridged through various means, including Saudi Arabia’s oil facility, a $400 million loan from the International Islamic Trade Finance Corporation (ITFC) and contributions from Middle Eastern commercial banks, such as Standard Chartered Bank.

Ghazi52 · Sep 27, 2024

The fears of approval were laid to rest after the State Bank Governor Jameel Ahmad said that Pakistan planned to raise up to $4bn from banks by the next fiscal to plug the gap. According to him, Pakistan was in the “advanced stages” of securing $2bn in additional external financing required for IMF approval.

Pakistan has long relied on IMF programmes to avoid default, frequently turning to financial assistance from friendly nations to meet IMF requirements.

This is Pakistan’s 25th IMF programme since 1958 and its 6th under the EFF framework. Despite the influx of funds, the programme leaves unaddressed a crucial issue: restructuring Pakistan’s external and domestic debt, which consumed 81 per cent of the nation’s tax revenues in the last fiscal year.

Faced with chronic mismanagement, Pakistan’s economy had found itself on the brink, challenged by the Covid-19 pandemic, the effects of the war in Ukraine and supply difficulties that fuelled inflation, as well as record flooding that affected a third of the country in 2022.

In February 2023, the rupee had undergone a historic devaluation of 15pc while the foreign reserves shrunk to a meagre $3.7bn, exacerbating fears that Pakistan was heading towards a default without a comprehensive IMF programme to prop it up. However, the country managed to clinch a nine-month $3bn IMF deal in June after addressing the Fund’s concerns about its reform agenda — with reserves hovering around $3bn.

In April, the finance minister had confirmed that the country had initiated talks for a longer programme to support strengthening public finances, restoring the energy sector’s viability, returning inflation to the target, and promoting private-led activity.

Ghazi52 · Sep 27, 2024

To meet the Fund’s criteria, the government announced new tax measures in several areas to generate additional revenue in the coming fiscal year in the finance bill, which included a 48 per cent increase in direct taxes, 35pc hike in indirect taxes, and a whopping 64pc increase in non-tax revenue such as petroleum levies.

The latest bailout, coming to Pakistan in the form of loans, follows a commitment by the government to implement reforms, including a major effort to broaden the country’s tax base.

In a nation of over 240m people and where most jobs are in the informal sector, only 5.2m filed income tax returns in 2022.

The government has amped up its efforts to raise nearly $46bn in taxes for the year, which includes drastic measures by the Federal Board of Revenue (FBR) such as ordering the telecommunications authority to block the connections of 210,000 SIM cards.