Pakistan reaches new $7 billion loan deal with IMF, says lender

ISLAMABAD: Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF) for a new $7 billion loan program, the IMF said on Friday, the country’s latest move to turn to the global lender for assistance in keeping its fragile economy afloat.
Pakistan completed a short-term $3 billion IMF program in April this year, with the release of a final tranche of $1.1 billion. The facility helped Islamabad avert a default last year. Pakistan’s Finance Minister Muhammad Aurangzeb said his government planned to seek a longer-term loan from the IMF to help stabilize the $350 billion economy after the end of the last program.
The IMF said the new loan deal, which will span 37 months, was aimed at strengthening fiscal and monetary policy as well as reforms to broaden the tax base, improve management of state-owned enterprises, strengthen competition, secure investment, enhance human capital, and scale up social protection through increased generosity and coverage in major welfare programs.
“The program aims to capitalize on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth,” IMF’s mission chief to Pakistan Nathan Porter said in a statement.
The deal, which is subject to approval by the IMF executive board, came after the government of Prime Minister Shehbaz Sharif presented its first budget in parliament last month, promising an increase of up to 25 percent in salaries of government employees and setting an ambitious tax collection target.
The finance minister said Pakistan wanted to collect Rs13 trillion ($44 billion) in taxes, which would be 40 percent more than the last fiscal year’s. He said the government would ensure an increase in the number of taxpayers the country from the existing 5 million people who paid taxes in Pakistan.
Analysts said the new budget of about $68 billion, up from $50 billion in the last year, was likely to land a longer-term IMF bailout of up to $8 billion to help stabilize the economy.