IMF approves $6bn bailout package for Pakistan
Pakistan would receive $2 billion loans in the current fiscal year.
ISLAMABAD (Dunya News/ AFP) - The Executive Board of the International Monetary Fund (IMF) on Wednesday (today) approved a three-year bailout package worth $6 billion to Pakistan.
"IMF Executive Board approved today a three-year US$6 billion loan to support #Pakistan’s economic plan, which aims to return sustainable growth to the country’s economy and improve the standards of living," Gerry Rice, the IMF spokesperson, confirmed on Twitter.
IMF Executive Board approved today a three-year US$6 billion loan to support #Pakistan’s economic plan, which aims to return sustainable growth to the country’s economy and improve the standards of living. pic.twitter.com/HCAMr1KWfK
— Gerry Rice (@IMFSpokesperson) July 3, 2019
IMF would deliver the amount in next three years where as Pakistan would receive $2 billion loan in current fiscal year.
With the IMF board s approval, the fund released $1 billion to Pakistan immediately and said in a statement the program aims to "support the authorities economic reform program" and to help "reduce economic vulnerabilities and generate sustainable and balanced growth."
The fund will review Pakistan s performance quarterly over 39 months, phasing release of the additional aid over time.
The government agreed on the loan program last month and announced plans to slash civil expenditures and freeze military spending while promising to substantially raise revenues to stem a yawning fiscal deficit, and pledging to collect 5.5 trillion rupees ($36 billion) in taxes.
Discontent is simmering in the country following repeated devaluations of the rupee, soaring inflation, and increasing utility costs, while tax collection has been a long-standing challenge for authorities.
"Pakistan is facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness and a weak external position," the result of a "legacy" of uneven policies, IMF mission chief Ernesto Ramirez Rigo said in a statement in June.
The agreement includes a primary budget deficit target of 0.6 percent of GDP excluding debt service costs.
The government, in its budget proposals for the next financial year, has added Rs357 billion loan from the IMF. An IMF team will visit Islamabad every three months to review the economic indicators of the country.
IMF and Pakistan s government had earlier already signed a staff agreement on May 12 in this regard.
Sources familiar with the matter told the media that Pakistan has adopted a tight monetary and fiscal policy stance based on all terms and conditions of the global moneylender in order to secure a three-year bailout package.
The bailout package will help Pakistan to pay its external debts, recover from its fiscal deficit, keep foreign exchange reserves to the equivalent of 3 months of imports and curb further devaluation of the rupee.
A couple of days ago, the Economic Coordination Committee (ECC) approved a significant increase in prices of natural gas for domestic consumers, which was one of the conditions of the global moneylender to secure its bailout package.
According to analysts, financial assistance from ‘friendly’ countries has not proven to be enough for the government to recover from the current financial crisis.
They were of the view that chances of Pakistan securing the bailout package are high as the country has accepted all terms and conditions; however the deal would have adverse effects on its economic growth.
