Pakistan & IMF Progress on $7B Loan Deal

ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have made substantial progress in reaching a Staff-Level Agreement (SLA) regarding the first review of the $7 billion loan program.

IMF Mission Chief to Pakistan, Nathan Porter, confirmed in a statement that the IMF and Pakistani authorities have advanced significantly in their discussions, focusing on the first review of Pakistan’s economic program under the Extended Fund Facility (EFF). The IMF team, led by Porter, was in Pakistan from February 24 to March 14 to discuss the review and explore the possibility of a new arrangement under the Resilience and Sustainability Facility (RSF).

Porter highlighted Pakistan’s strong implementation of the bailout package, noting progress in several key areas. These include fiscal consolidation to reduce public debt, maintaining tight monetary policy to curb inflation, implementing cost-reducing reforms in the energy sector, and advancing structural reforms aimed at accelerating growth, improving social protection, and rebuilding health and education spending.

Regarding the potential Resilience and Sustainability Facility (RSF), Porter also emphasized Pakistan’s climate reform agenda aimed at reducing risks from natural disasters and boosting sustainability efforts.

If the IMF approves the first review, Pakistan is set to receive approximately $1 billion as part of the second installment of the loan package. Pakistan is also anticipating an additional $1 billion to $1.2 billion under the RSF.

The two-week negotiations have led to a revised macroeconomic and fiscal framework for the current fiscal year. Projections for GDP growth, inflation, and the current account deficit were adjusted. As a result, Pakistan’s economic size was revised down from Rs123 trillion to Rs116.5 trillion. The real GDP growth projection and CPI-based inflation were also revised downward.

Read more: Pakistan closer to finalizing $2 Billion Loan after successful IMF EFF Review Talks

In addition, Pakistan has agreed to abandon the controversial Tajir Dost Scheme (TDS) after data from the Federal Board of Revenue (FBR) revealed that tax collections from retailers, wholesalers, and Associations of Persons (AOPs) had far exceeded the original target. The FBR is now introducing Video Analytics Rules for the electronic monitoring of production processes to bring more goods into the tax net.

The government also expects to receive up to $2.2 billion as part of the loan package, including both the EFF and RSF augmentation, further bolstering the country’s financial stability.

Finance Minister Muhammad Aurangzeb confirmed that consultations with the IMF would continue in the coming days, with expectations for a positive outcome. The IMF’s continued support plays a crucial role in Pakistan’s economic recovery efforts, according to government officials.