Pakistan secures $7 billion loan agreement with IMF

Pakistan has secured a staff-level agreement for a new $7 billion loan deal with the International Monetary Fund (IMF), marking the country's latest effort to bolster its economy and address its debts through significant financial assistance. The IMF recently greenlit the final $1.1 billion tranche of a $3 billion bailout to Pakistan, with Finance Minister Muhammad Aurangzeb revealing plans to pursue a long-term loan post the current bailout's conclusion. The 37-month loan agreement aims to enhance fiscal and monetary policies, broaden the tax base, improve state-owned enterprise management, foster competition, facilitate investment, boost human capital, and expand social protection programs, according to the IMF. Nathan Porter, the IMF's mission chief to Pakistan, emphasized that the program seeks to build upon the country's recent macroeconomic stability achievements by fortifying public finances, curbing inflation, bolstering external reserves, and rectifying economic distortions to stimulate private sector-driven growth. The agreement is pending approval by the IMF's executive board. Pakistan's new coalition government unveiled its inaugural budget in parliament, pledging a potential 25% salary hike for government employees and setting an ambitious tax collection goal of 13 trillion rupees ($44 billion) – a 40% increase from the current fiscal year. Aurangzeb also highlighted the government's commitment to boosting the number of taxpayers, as only around 5 million individuals in Pakistan currently contribute to taxes. Financial analysts noted that the proposed budget of approximately $68 billion, up from $50 billion in the previous fiscal year, is designed to meet the criteria for a long-term IMF loan ranging from $6 billion to $8 billion, aimed at stabilizing Pakistan's economy. The country faced a near-default on foreign debt payments in 2023, underscoring the urgency of securing external financial support. The IMF's assistance is expected to aid Pakistan in addressing economic challenges, implementing crucial reforms, and fostering sustainable growth in the coming years.