ISLAMABAD: The $6 billion loan package for Pakistan approved by the International Monetary Fund last week will require “very ambitious” fiscal measures and sustained commitment for the bailout to succeed, IMF officials said on Monday.
The three-year agreement approved by the IMF board last week, Pakistan’s 13th bailout since the late 1980s, has seen a sharp drop in the value of the rupee currency after the central bank agreed to a “flexible, market-determined exchange rate.”
It also foresees structural economic reforms and a widening of the tax base to boost tax revenues that are currently estimated to account for less than 13% of gross domestic product (GDP) by 4-5 percentage points.
With slowing growth, a budget deficit which has climbed to more than 7% of GDP and currency reserves of less than $8 billion, or enough to cover 1.7 months of imports, Pakistan has teetered on the edge of a debt and balance of payments crisis.
Ernesto Ramirez Rigo, the Fund’s mission chief for Pakistan said the program targets were tough but Prime Minister Imran Khan’s government, which came to power last year vowing not to turn to the IMF, was committed.
“We certainly think that debt sustainability under the program will be assured,” he told a conference call with reporters, adding that it would require “very ambitious” fiscal consolidation, mainly through improved revenue collection.
Pakistan has a notoriously narrow tax base, with less than 1% of its 208 million population filing income tax returns, a vast informal economy and several key sectors of the official economy largely exempt from tax.
The IMF loan and the associated package of reforms that goes with it will unlock another $38 billion in loans from other international partners but commitment by Pakistani authorities in pushing through reform was essential, Ramirez Rigo said.
“Consistency and sustained implementation is key.”
The 2020 budget, passed last month, approved tax measures worth some 1.7% of GDP to help cut the deficit and Pakistan has promised a multiyear effort to overhaul its tax and budget system to put its public finances on a firmer footing.
A central part of the program will involve cleaning up accumulated debts in the power and gas sectors and in loss-making state enterprises including Pakistan International Airlines, Pakistan Steel Mills, and Pakistan Railways.
Losses built up in the power sector now amount to the equivalent of 4% of GDP, posing a serious fiscal risk, while losses in the big three state enterprises amount to 2% of GDP, the IMF said in a report on the package.
The tough conditions of the package, which has already seen interest rates hiked by 150 basis points and which will see a raft of tax loopholes closed, has already drawn resentment among households facing inflation running at around 9%.
Ramirez Rigo said there was a risk that the difficulties of implementing some of the policies in the package were “more complicated than we have assumed” and that there would be problems in building consensus behind the reforms.
He also said any sharp rise in oil prices could unbalance the reform drive given Pakistan’s heavy dependence on imported energy.
IMF says Pakistan bailout sets ambitious fiscal targets
IMF says Pakistan bailout sets ambitious fiscal targets
- The Fund says the program targets are tough but PM Khan’s government is committed
- IMF official says any sharp rise in oil prices could unbalance the reform drive given Pakistan’s heavy dependence on imported energy
Pakistan says defense pact with Saudi Arabia elevated brotherly ties to ‘new heights’
- Pakistan, Saudi Arabia signed strategic defense pact last year pledging aggression against one will be treated as attack on both
- Deputy PM Ishaq Dar says enduring bonds with Islamic and Arab nations form vital pillar of Pakistan’s foreign policy
ISLAMABAD: Deputy Prime Minister Ishaq Dar said on Wednesday that Pakistan’s defense pact with Saudi Arabia elevated its brotherly ties with the Kingdom to “new heights,” stressing that close ties with Arab and Islamic nations form a key pillar of Islamabad’s foreign policy.
Pakistan and Saudi Arabia signed a Strategic Mutual Defense Agreement on Sept. 17 last year, pledging that aggression against one country would be treated as an attack on both, enhancing joint deterrence and formalizing decades of military and security cooperation.
Both nations agreed in October 2025 to launch an economic cooperation framework to strengthen trade and investment ties.
“In the Middle East, our landmark Strategic Mutual Defense Agreement with Saudi Arabia has elevated our brotherly ties to new heights,” Dar said while speaking at the Pakistan Governance Forum 2026 event in Islamabad.
The Pakistani deputy prime minister was speaking on the topic “Navigating International Relations Amidst Changing Geo-Politics.”
Dar noted that Pakistan has reinforced partnerships with other Middle Eastern nations such as the UAE, Qatar, Jordan, Oman, Egypt and Bahrain. He said these partnerships have yielded “concrete agreements” in investment, agriculture, infrastructure, and energy sectors.
“Our enduring bonds with Islamic and Arab nations form a vital pillar of our foreign policy, and we will continue to expand our partnerships across Asia, Latin America, and Africa,” he said.
Dar pointed out that the presidents of Kazakhstan, Uzbekistan and Kyrgyzstan have undertaken visits to Pakistan in recent months, reflecting Central Asian nations’ desire to boost cooperation with Islamabad.
On South Asia, the Pakistani deputy PM said Pakistan has successfully transformed its fraternal ties with Bangladesh into “a substantive partnership.”
“Similarly, the trilateral mechanism involving China, Pakistan, and Bangladesh has been launched with a view to expanding and deepening regional cooperation and synergy,” the Pakistani minister said.
He said Islamabad has strengthened its “all-weather” partnership with China via the second phase of the multi-billion-dollar China-Pakistan Economic Corridor agreement and “unwavering support” from both sides for each other’s core interests.
Dar said Pakistan had also reinvigorated its partnership with the US, advancing cooperation in trade, technology, investment, and regional stability.
“This calibrated approach has enhanced our ability to navigate complexity with skill and confidence, ensuring that our national interests are served without compromising our core foreign policy principles,” he said.
