The International Monetary Fund announced that it had reached a preliminary agreement with the Pakistani government to give it two new loans with a total value of two billion dollars, in the context of supporting the country’s efforts to rebuild its fragile economy and enhance its ability to adapt to climate change.
According to a statement issued by the fund, the agreement includes the exchange of about one billion dollars as a second payment from the previous rescue package, which has a total value of $ 7 billion, which was reached in 2023.
The Fund also approved a new agreement under what is known as the “Resilience and Sustainability Program”, allowing Pakistan to reach additional $ 1.3 billion over 28 months.
The Bloomberg Agency said that the KRICI Stock Exchange index (KSE-100) scored its highest gains in three weeks, and closed 0.9% today, Wednesday, after the announcement.
The value of the Pakistani dollar bonds increased, as the return on 2029 bonds reached its highest level in more than a month.
“Pakistan has made great progress in restoring total economic stability and confidence -building, despite the difficult global challenges,” said the head of the International Monetary Fund Mission to Pakistan Nithan Porter.
Strict conditions
The French Press Agency stated that this new agreement, which is the 24th of Pakistan since 1958, is linked to strict conditions, including:
- Improving tax revenues, especially income tax.
- Reducing government support for the electricity sector.
- Adopting a strict monetary policy.
- Making structural repairs to reduce spending.
The IMF statement added that the “RSF” program aims to enhance Pakistan’s ability to confront natural disasters, and improve investment and budgetary planning to accelerate the adaptation with climate change.
According to Pakistani Prime Minister Shahbaz Sharif, the fund agreed to reduce the goal of collecting taxes by 600 billion rupees (about 2.14 billion dollars), to reach 12.3 trillion rupee (about $ 43.89 billion) until June.
Government steps
Bloomberg reported that the Pakistani government has already taken a series of strict steps to meet the requirements of the fund, including:
- Raising taxes on fuel.
- Approving a law to impose taxes on the income of the agricultural sector.
- Seeking the privatization of Pakistani Airlines.
In its recent talks, the government confirmed that it is committed to continuing to control public financial conditions and gradually reduce public debt. She also pledged to implement reforms to address old structural imbalances in the economy.
For its part, the Monetary Fund indicated that the political war and economic shrinkage during the year 2023 brought Pakistan to the edge of the failure to pay, which necessitated obtaining the rescue package.
Since then, economic indicators have improved, with inflation rates decreased and foreign exchange reserves increased.
Bloomberg indicated that the credit rating agents “Moody’s” and “Fitch” last year raised the credit rating of Pakistan, which reflects an improvement in the perception of the Pakistani economy.
The IMF statement confirmed that the approval of the Executive Council on the second review of the current program will allow Pakistan to obtain an additional billion dollars, which will raise the total amounts offered in the framework of the existing program to about two billion dollars.
Porter concluded his statement by saying: “In the last 18 months, Pakistan has made great progress in restoring macroeconomic stability and rebuilding confidence,” despite the difficult international and local circumstances.
