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Pakistan and IMF near loan agreement amid economic reforms

Discussions regarding a new loan programme commenced between the IMF and Pakistan following the conclusion of a short-term £2.4 billion programme last month. (Representative image: iStock)

By: Vibhuti Pathak

The recent talks followed the conclusion of a short-term £2.4 billion programme last month, which was crucial in helping Pakistan avoid a sovereign debt default. The IMF delegation, led by mission chief Nathan Porter, arrived in Pakistan on May 13 and concluded discussions with Pakistani authorities on Thursday. Policy discussions will continue virtually to finalise the necessary financial support to bolster Pakistan’s reform efforts.

The IMF’s announcement led to a significant boost in Pakistan’s benchmark share index, which reached a record high, surpassing the 76,000 level.

Nathan Porter highlighted that Pakistan’s reform programme aims to transition the country from economic stabilisation to robust, inclusive, and resilient growth. These reforms include strengthening public finances through fairer taxation, increasing expenditure on human capital, social protection, and climate resilience, and ensuring the viability of the energy sector by reducing energy costs.

Further objectives of the reform programme include maintaining low and stable inflation through appropriate monetary and exchange rate policies, improving public service provision via restructuring and privatisation of state-owned enterprises (SOEs), and promoting private sector development by ensuring a level playing field for investment and enhancing governance.

Porter described the discussions as “fruitful” and expressed optimism about continuing the policy discussions virtually to finalise the required financial support from the IMF and Pakistan’s partners.

Pakistan is anticipated to seek at least $6 billion under the new programme and may request additional financing from the IMF under the Resilience and Sustainability Trust.

The IMF has emphasised that the prioritisation of reforms to revitalise Pakistan’s economy is of greater importance than the size of the new loan package under negotiation. Earlier this month, the IMF cautioned that the downside risks to Pakistan’s economy remained exceptionally high.

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