Aljazeera.net correspondents
Pakistan has reached a staff-level agreement with the International Monetary Fund for a fresh $7 billion bailout package under the fund’s three-year Extended Fund Facility.
This comes after the federal government in Islamabad approved the new 2024-2025 budget two weeks ago, which a large segment of the Pakistani people expressed dissatisfaction with due to its imposition of new taxes on some sectors.
Growing conditions
The Pakistani Ministry of Information stated that the new program of the Fund aims to support the efforts of the Pakistani authorities to enhance macroeconomic stability and create conditions for stronger, more inclusive and resilient economic growth, including steps to strengthen fiscal and monetary policy and reforms to expand the tax base, as part of Pakistan’s policy to meet the conditions of the International Monetary Fund depends on increasing tax revenues.
The new program for Pakistan still needs to be approved by the IMF’s Executive Board, with the international institution noting that the program should enable Pakistan to “strengthen macroeconomic stability and create conditions for stronger, more inclusive and resilient growth.”
The IMF stressed that continued strong financial support from Pakistan’s development partners and bilateral partners will be critical to enable the programme to achieve its objectives.
For his part, Pakistani Finance Minister Muhammad Aurangzeb said during a press conference that the new agreement signed with the International Monetary Fund will help achieve macroeconomic stability, stressing the country’s need, under the Fund’s terms, to ensure structural reforms and achieve self-sustainability in the areas of public finance, energy and state-owned enterprises.
Tax revenue
The government seeks to increase tax revenues by 1.5% of GDP in fiscal year 2025, and 3% of GDP during the bailout programme, in an attempt to save Pakistan’s ailing economy from collapse.
The government also aims to cut its fiscal deficit by 1.5% to 5.9% next year, in response to another key request from the International Monetary Fund.
In recent years, Pakistan has faced a foreign exchange reserve deficit and a debt crisis, forcing it to turn to the International Monetary Fund, where it obtained an emergency loan in the summer of 2023, worth $3 billion for a period of 9 months, which Pakistan finished repaying a few months ago.
