Pakistan reported Wednesday that the International Monetary Fund, or IMF, had approved a crucial $7 billion loan for the cash-strapped nation struggling to meet its external financing needs.
In a statement issued by his office, Pakistani Prime Minister Shehbaz Sharif “expressed satisfaction” and hailed the IMF’s approval of the much-needed loan. He also thanked Kristalina Georgieva, the IMF chief, and his own economic team for successfully negotiating the agreement, the statement said.
The Washington-based global lender was expected to release a separate statement.
Pakistani media reports said the IMF had agreed to the 37-month loan agreement for the South Asian nation under the Extended Fund Facility and authorized the immediate release of the first tranche of nearly $1.1 billion.
Sharif, who is in New York for the U.N. General Assembly session, told Pakistani media representatives before Wednesday’s approval that his government had met all of the lender’s conditions.
He stated that the lender had “set stringent conditions” for the loan program preliminarily agreed to in July. The prime minister credited Pakistan’s longtime allies, China, Saudi Arabia and the United Arab Emirates, with helping Islamabad finalize the IMF deal, but he did not elaborate.
Pakistan was required to seek an extension on existing $5 billion, $4 billion and $3 billion cash loan agreements from Riyadh, Beijing and Abu Dhabi to fulfill a critical IMF condition.
Islamabad reportedly has committed not to repay more than $12 billion in debt to three allied nations and Kuwait during the 37-month IMF program period.
The new $7 billion loan is Pakistan’s 25th IMF program since it gained independence in 1947 — the highest number acquired by any country.
“We are committed to ensuring this is the last time we seek such financial support from the IMF,” Sharif reiterated while speaking to Pakistani media in New York. However, critics remain skeptical about his assertions.
Experts blame chronic economic mismanagement, corruption, repeated dictatorial military regimes, and the failure of successive elected governments to introduce much-needed reforms for the financial troubles facing Pakistan, a nuclear-armed country of more than 240 million people.
Islamabad has managed its external funding needs in the past with loans, economic support from its long-standing allies and IMF financial assistance.
Historic inflation
Experts describe Pakistan’s latest economic crisis as the most prolonged. Inflation reached historic levels, pushing the country to the brink of default on its external payments before an IMF bailout helped avert the crisis last summer.
Inflation has since eased, and credit ratings agency Moody’s has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings, citing improved macroeconomic conditions and moderately better government liquidity and external positions.
The Sharif administration also has ramped up efforts to increase its tax intake in line with the IMF requirements, despite protests by traders and opposition parties over the new tax scheme and high energy rates.
The Asian Development Bank, or ADB, said in a Wednesday report that Pakistan’s economic outlook hinges on continued and effective economic reform. It expected the IMF loan program to enhance the country’s macroeconomic stability, consolidate public finances, expand social spending and protection, and rebuild foreign exchange, among other things.
“The new government has committed to the necessary stabilization and structural reforms but faces challenges owing to elevated political and institutional tensions and the prospects of social unrest from a steep drop in real incomes,” the ADB warned.
Pakistan’s economic troubles have deepened because of the political turmoil that hit the country in April 2022 when then-Prime Minister Imran Khan was removed from office through a controversial opposition-led parliamentary vote of no confidence.
Khan, who has been imprisoned for more than a year on contentious charges, is the most popular politician in Pakistan. His Pakistan Tehreek-e-Insaf Party has been organizing anti-government protests.
The party alleges that election authorities rigged the February 8 parliamentary polls to hinder Khan-backed candidates from winning and helped military-backed parties’ allies to form a coalition government, charges Sharif and army officials deny.
Some information for this report came from Reuters.
