In addition to reviewing an existing bailout that, if granted, would unleash an additional $1 billion, the IMF announced Tuesday that it had achieved an agreement with Pakistan on a new $1.3 billion credit program.
The International Monetary Fund stated in a statement announcing its decision that the new 28-month agreement would help Pakistan’s efforts to adapt to and reduce the effects of climate change.
The Fund’s executive board must approve both the loan review and the new program, which is essentially a rubber stamping process.
When a political crisis exacerbated an economic downturn and pushed the country’s debt load to crippling proportions, Pakistan was on the verge of default in 2023.
After receiving a $7 billion IMF bailout, it has experienced some recovery, with foreign exchange reserves rising and inflation decreasing.
However, there were strict requirements that the nation increase income tax revenue and reduce public electricity subsidies in order to offset the expenses of the inefficient industry. This was Pakistan’s 24th contract since 1958.
On Tuesday, the IMF said the Pakistani authorities remained “committed to advancing a gradual fiscal consolidation to sustainably reduce public debt,” along with tight monetary policy, cost-cutting measures and reforms, as they agreed in principle to the second review of the existing 37-month program.
Pakistani authorities will have access to new funds totaling approximately $1 billion if the agreement is accepted by the Fund’s executive board.
According to the Fund, that would raise the total amount disbursed under the current scheme to about $2 billion.
“Over the past 18 months, Pakistan has made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment,” IMF mission chief Nathan Porter said in a statement.
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