Pakistan has reached technical agreement on a new $7 billion loan deal, the International Monetary Fund said on Friday, the latest time the country has turned to the global lender for help to prop up its economy. economy and deal with their debts through large redemptions.
Earlier this year, the IMF approved the immediate release of the final installment of US$1.1 billion from a Rescue of US$ 3 billion to Pakistan. Finance Minister Muhammad Aurangzeb said the government plans to seek a long-term loan to help stabilize the economy after the rescue package ends.
The new loan contract will last for 37 months. It aims to strengthen fiscal and monetary policy, as well as reforms to broaden the tax base, improve the management of public enterprises, strengthen competition, ensure a level playing field for investment, improve human capital and increase social protection through of greater generosity and coverage in a large welfare program, the IMF said.
“The program aims to capitalize on hard-won macroeconomic stability over the past year by intensifying efforts to strengthen public finances, reduce inflation, rebuild external buffers and eliminate economic distortions to stimulate private sector-led growth,” said Nathan Porter, IMF representative. head of mission in Pakistan.
The agreement is subject to approval by the IMF executive board.
Pakistan’s new coalition government presented its first budget in parliament last month, promising an increase of up to 25% in civil servant salaries and setting an ambitious tax collection target.
The finance minister said Pakistan wants to collect 13 billion rupees ($44 billion) in taxes, which would be 40% more than in the current fiscal year.
Aurangzeb also said that the government will ensure that the number of taxpayers increases. Only about 5 million people in Pakistan pay taxes.
Analysts said the new budget of about $68 billion — up from $50 billion in the last fiscal year — was aimed at qualifying for a long-term IMF loan of $6 billion to $8 billion to help to stabilize the economy. Pakistan in 2023 has almost stopped paying its external debts.
