KARACHI: Pakistan has taken the International Monetary Fund (IMF) on board over its targets under a $7 billion loan program it secured in September, a finance ministry official said this week, days before the arrival of an IMF mission in the South Asian nation for the program’s first review.
A successful review, expected later this month or in early March, would see the Washington-based lender release around $1 billion tranche to cash-strapped Pakistan, which seeks to boost its foreign exchange reserves to achieve the IMF’s threshold of three months import cover.
IMF bailouts are critical for Pakistan which narrowly avoided a sovereign default in June 2023 by clinching a last-gasp, $3 billion IMF loan and is currently navigating a tricky path to economic recovery.
“We are on track,” Khurram Schehzad, an adviser at the Pakistani finance ministry, told Arab News in an interview on Monday. “The IMF is on board on the targets and benchmarks that we have achieved as well as only a few we are chasing. We are fully prepared to go into the review process.”
The statement is expected to allay investor concerns about Pakistan meeting the IMF’s conditions to reform its economy by cutting on energy subsidies, broadening the tax net to agriculture, real estate and retail sectors, and privatizing loss-making, state-owned enterprises like the Pakistan International Airlines (PIA).
“We are working on the taxation side by bringing in the under-taxed and non-taxed sectors into the net by broadening, deepening and widening it,” Schehzad said.
Provincial governments in Pakistan’s Sindh, Punjab, Khyber Pakhtunkhwa and Balochistan provinces have recently enacted laws to impose taxes on farm incomes, fulfilling one of the IMF’s requirements.
Since averting an imminent default on its external debt in 2023, Pakistan is now keeping its current account in check primarily through containing imports. The country’s exports rose 10 % to $19.6 billion in the last seven months till January, while it is keeping tabs on imports that increased by 7 % to $33 billion, according to Pakistan Bureau of Statistics.
“Our balance of payment position is going to be manageable this year,” said Schehzad, who believes population growth and climate change are the two biggest challenges facing Pakistan’s economy.
The country achieved a current account surplus of $1.2 billion from July 2024 till December 2024 and is expecting to receive a record $35 billion worker remittances by June 2025. It expects IT exports to increase to $4 billion this year.
As jailed former prime minister Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party carries out countrywide protests to demand the return of its “stolen” mandate in the last general election, PM Shehbaz Sharif’s government is trying to shore up the fragile economy, which Schehzad said is expected to expand in the range of 3 % to 3.5 % this financial year ending in June.
Pakistan’s central bank has slashed the interest rate by a cumulative 1,000 basis points to 12 % since June to spur economic growth, thanks to the easing inflation that rose 2.41 % last month, the lowest in more than nine years.
“We are keeping an eye on the prices of all essential items that should be reflective of the prevailing inflation numbers, so to close the gap between numbers and on-ground prices,” the finance adviser said.
The pace of price hike is expected to ease further in the months ahead, which will create more room for the central bank to decrease the rate of bank borrowing.
“We are giving priority to long-term sustainability of the economy over short term reliefs,” Schehzad said.
The Pakistani government is striving to turn the hard-earned economic stability with fiscal and external consolidation into a growth that is export-led and driven by productive and efficient investments primarily by the private sector, according to the finance adviser.
The government is working to break the so-called boom-and-bust cycle Pakistan’s economy has been “suffering from in the past many years now” and targets 6 % and above growth by 2029, Schehzad added.
