WASHINGTON: The Executive Board of the International Monetary Fund (IMF) will meet on Tuesday in Washington to give final approval for a $7 billion loan package for Pakistan, aimed at stabilizing the country’s fragile economy.
This new 37-month loan package marks Pakistan’s 24th IMF assistance program. With its approval, Pakistan will also become eligible to receive funds from other international organizations and countries.
The anticipated approval of the loan follows a staff-level agreement reached between Pakistan and the international lender on July 12.
Pakistani officials have confirmed that all preconditions for the loan, including securing $2 billion in additional financing and consolidating $12.7 billion in debt, have been fulfilled.
China, Saudi Arabia, the UAE, and Kuwait have also provided crucial support by deferring Pakistan’s loan payments for one year.
As part of the IMF’s preconditions, Pakistan has borrowed from international commercial banks at an interest rate of 11%, one of the highest rates in the country’s history.
Finance Ministry officials revealed that Pakistan must repay $100 billion in debt over the next four years. Additionally, loans from friendly countries will need to be rolled over annually, while an additional $5 billion in external financing is projected to be required within the next three years.
To meet the stringent demands of the IMF program, Pakistan will need to gradually raise its tax-to-GDP ratio by 3% over the same period. Sectors such as retail, wholesale, exports, and agriculture are expected to be brought under the tax net as the government looks to increase revenues.
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