In a significant development for Pakistan's economy, Prime Minister Shehbaz Sharif has announced that the country has fulfilled all conditions set by the International Monetary Fund (IMF) for a new $7 billion loan. This announcement comes as Pakistan grapples with one of its most severe economic crises in recent history.
During a cabinet meeting in Islamabad, Sharif commended his finance team for their efforts in meeting the IMF's requirements. The global lender is expected to formally approve the loan on September 25, 2024, when its board of executive directors convenes.
The IMF, established in 1944 at the Bretton Woods Conference, has been a crucial financial partner for Pakistan since the country joined the organization on July 11, 1950. This latest arrangement marks Pakistan's 24th engagement with the IMF, highlighting the nation's ongoing economic challenges.
To secure the loan, Pakistan has implemented several measures demanded by the IMF, including broadening the tax base and eliminating energy subsidies. These actions, while necessary for the bailout, have raised concerns among citizens who are struggling with high energy bills amidst an inflation rate that reached 29.2% in April 2023.
Sharif also acknowledged China's role in helping Pakistan secure the bailout, underscoring the complex geopolitical dynamics at play. It's worth noting that China is Pakistan's largest bilateral creditor, reflecting the intricate economic relationships in the region.
The new loan deal, if approved, will span 37 months and is designed to help stabilize Pakistan's economy. With a GDP of approximately $376.5 billion in 2023 and a public debt-to-GDP ratio around 77%, Pakistan faces significant economic hurdles.
"All matters with the IMF have been finalized amicably."
The IMF, headquartered in Washington, D.C., has a total lending capacity of about $1 trillion and serves 190 member countries. Its Extended Fund Facility (EFF), under which this loan is likely to be granted, is specifically designed to assist countries with serious medium-term balance of payments problems.
As Pakistan moves forward with this loan agreement, Sharif has expressed hope for reducing the country's reliance on foreign loans in the future. This aspiration comes against the backdrop of the Pakistani Rupee's significant devaluation in recent years, adding to the economic pressures faced by the nation.
The coming months will be crucial for Pakistan as it navigates the implementation of the IMF program while addressing the immediate needs of its population. The success of this bailout could play a pivotal role in shaping Pakistan's economic trajectory in the years to come.