IMF agrees to resume inflation-hit Pakistan's loan after fuel, tax hikes
Pakistan economy
The International Monetary Fund (IMF) said on Thursday that it and Pakistan had reached an agreement to begin a loan programme that had been put on hold. This will inject $1.17 billion into the faltering economy.The new accord comes after months of profoundly unpopular belt-tightening by Shehbaz Sharif's government, which gained power in April and has virtually scrapped gasoline subsidies while also introducing new measures to increase the tax base.Imran Khan, theformer prime minister, signed a $6 billion bailout deal in 2019, but it constantly stalled because of his administration's violation of subsidy agreements and poor tax collection.
Watch |Pakistan economic crisis: Inflation at a 13-year high
A statement by the IMF posted on its website says, "The IMF team has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eight reviews of the EFF-supported program. The agreement is subject to approval by the IMF’s Executive Board. Subject to Board approval, about $1,177 million (SDR 894 million) will become available, bringing total disbursements under the program to about $4.2 billion.
It further added that "in order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing", an extension of the EFF through June 2023 will be considered by the IMF Boardalong with"an augmentation of access by SDR 720 million that will bring the total access under the EFF to about US$7 billion."
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The IMF team's leader, Nathan Porter, stated in the statement that "Pakistan is at a challenging economic juncture" and added that both foreign forces and domestic policy were to blame.
Pakistan's economy, which suffers from subpar income collection and diminishing foreign reserves to cover its crushing debt, is in dire need of international assistance.
As per AFP, to satisfy the demands of international financial institutions, the new administration has drastically reduced the number of subsidies, but by doing so, it runs the risk of angering the populace, which is already suffering from double-digit inflation.
Also read |Is Pakistani rupee so worthless that this cop in Karachi demanded goats and cowas bribe?
Islamabad has already received $3 billion from the initiative, but officials requested an extension until June 2023 since the facility was set to close later this year.
Last month, Miftah Ismail, the finance minister, told the national assembly that it had become "essential to resume the IMF programme to save the country from default".
"We knew it would damage our political reputation, but still we did it."
(With inputs from agencies)
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