IMF Reaches $7 Billion Loan Deal with Pakistan

The International Monetary Fund (IMF)  signed an agreement with the Pakistani government to establish an aid program worth $7 billion over three years.

The new program, which has not yet been approved by the Fund's Executive Board, is supposed to enable Pakistan to "strengthen economic stabilization efforts and create conditions for strong, inclusive and sustainable growth," according to a statement by the Fund.

The statement quoted Nathan Porter, head of the International Monetary Fund mission in the country as saying that “the program aims to strengthen the hard-won macroeconomic stability achieved over the past year and continue efforts to improve public finances and reduce inflation,” according to Agence France-Presse.

Facing chronic mismanagement, Pakistan's economy has found itself on the brink of collapse, hampered by the COVID-19 pandemic, the effects of the war in Ukraine, and supply difficulties that have fueled inflation, as well as unprecedented floods that affected a third of the country in 2022.

In light of dwindling foreign currency reserves, Pakistan found itself in a debt crisis and was forced to turn to the International Monetary Fund, and obtained the first loan in the summer of 2023 in exchange for taking austerity measures. At the end of  June, the government voted to combine new austerity measures with a sharp increase in taxes, hoping to achieve 40% more revenue than last year.

But the International Monetary Fund stresses that much effort remains to be made and calls in particular for a better distribution of budgetary efforts between the federal government and the regions, improved access to financing, and continued fight against inflation.