WASHINGTON(AFP) – The International Monetary Fund (IMF) said on Tuesday it has reached agreement with Pakistan on a new USD1.3 billion loan programme and reviewed an existing bailout that would, if approved, unlock an additional USD1 billion.
The new 28-month deal would support Pakistan’s efforts to mitigate and adapt to climate change, the IMF said in a statement announcing its decision.
Both the new programme 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.
It was saved by a USD7 billion bailout from the IMF and has enjoyed a degree of recovery, with inflation easing and foreign exchange reserves increasing.
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.
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 programme.
Assuming the agreement is approved by the Fund’s executive board, the Pakistani authorities will get access to fresh funds worth around USD1 billion.
That would bring the total disbursements under the existing programme to around USD2 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.
