By The International Monetary Fund (IMF) has approved a $7 billion loan for Pakistan, aimed at bolstering its struggling economy, which has faced significant challenges over the past year. Political turmoil following the catastrophic 2022 monsoon floods, along with decades of mismanagement and a global economic downturn, brought the country to the brink of default.
The three-year loan program will require Pakistan to implement sound policies and reforms to enhance its economic stability and promote inclusive and resilient growth, according to an IMF statement. This marks the 24th IMF payout to Pakistan since 1958, with the deal having been agreed upon in July in exchange for unpopular reforms, including broadening the country’s chronically low tax base.
Prime Minister Shehbaz Sharif emphasized in July that this should be the last program with the IMF, highlighting the need for sustainable financial practices moving forward. Despite efforts to unlock this new loan, Pakistan’s financial situation remains precarious, characterized by high inflation and substantial public debt.
The IMF noted that while Pakistan has made significant strides toward restoring economic stability through consistent reforms, the country still faces formidable vulnerabilities and structural challenges. The economic recovery is further complicated by a largely informal job market, with only 5.2 million out of over 240 million citizens filing income tax returns in 2022.
The recent approval comes after months of negotiations with IMF officials and is contingent on extensive reforms, including increases in household utility bills to address ongoing issues in the crisis-ridden energy sector and improvements in tax revenue collection.
