The International Monetary Fund’s (IMF) Executive Board is scheduled to meet in Washington today to approve a vital $7 billion loan package aimed at stabilizing Pakistan’s struggling economy. This new 37-month bailout program marks the 24th time Pakistan has received financial assistance from the IMF. Once approved, Pakistan will also gain access to funds from other international organizations and partner nations.
This loan approval follows a staff-level agreement reached on July 12 between Pakistan and the IMF. Pakistani authorities have confirmed that all necessary conditions, including securing an additional $2 billion in financing and consolidating $12.7 billion in debt, have been met.
As part of the IMF’s terms, Pakistan borrowed from international commercial banks at a historically high 11% interest rate. Officials from the Finance Ministry have disclosed that the country must repay $100 billion in debt over the next four years. Moreover, loans from allied countries will need to be renewed annually, and Pakistan is expected to require an extra $5 billion in external financing within the next three years.
To meet the IMF’s stringent requirements, Pakistan must gradually raise its tax-to-GDP ratio by 3% over the same period. Key sectors such as retail, wholesale, exports, and agriculture are expected to be brought into the tax system to boost government revenue.
Officials also stressed the importance of continuing reforms in tax administration, energy, and governance to fully benefit from the IMF package. Provincial governments have expressed their support for the program, focusing on achieving macroeconomic stability and promoting sustainable development.
Pakistan Faces Rs49 Trillion Local Loan Obligation by 2030
The Finance Ministry emphasized that the loan package will not only provide essential funds but will also unlock additional financial support from other international organizations and nations. This assistance will be crucial in addressing Pakistan’s economic challenges and implementing long-term reforms.
Last week, the National Assembly’s Standing Committee on Finance was informed that Pakistan will need $100 billion in external financing over the next four years, with an additional $12 billion required over the next three years to address ongoing economic difficulties.
While the IMF is expected to contribute $7 billion, Pakistan will also need to secure another $5 billion from commercial banks and other financial institutions. Loans from key allies like China, Saudi Arabia, and the UAE will also need to be rolled over. Despite this new IMF bailout, officials warned that Pakistan’s external financial challenges will persist, as debt levels have risen by an average of 14% annually over the past five years.
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