The International Monetary Fund (IMF) announced Thursday that it had reached an agreement with Pakistan to restart a suspended loan programme worth $1.17 billion.
According to an IMF statement,”[The] IMF staff and the Pakistani authorities have reached a staff level agreement on policies to complete the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF).”
A statement issued by the Fund said that the agreement is subject to approval by the IMF’s Executive Board.
“Additionally, in order to support program implementation and meet the higher financing needs in FY23, as well as catalyze additional financing, the IMF Board will consider an extension of the EFF until end-June 2023 and an augmentation of access by SDR 720 million that will bring the total access under the EFF to about US$7 billion.”
The IMF team, led by Nathan Porter, has completed discussions for the seventh and eighth reviews of Pakistan’s economic programme, which is supported by an IMF EFF.
“Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers,” the IMF statement read.
Former Prime Minister Imran Khan signed a $6 billion bailout package in 2019, but it was repeatedly stalled when his government breached subsidy agreements and failed to significantly improve tax collection.
In a tweet, Finance Minister Miftah Ismail confirmed the agreement reached with the IMF, “Pakistan and IMF have reached an agreement. We will soon receive $1.17b as the combined 7th & 8th tranche. I want to thank the PM, my fellow ministers, secretaries and especially the finance division for their help and efforts in obtaining this agreement.”
Pakistan and IMF have reached an agreement. We will soon receive $1.17b as the combined 7th & 8th tranche. I want to thank the PM, my fellow ministers, secretaries and especially the finance division for their help and efforts in obtaining this agreement. https://t.co/376sCHLc1Y
— Miftah Ismail (@MiftahIsmail) July 14, 2022
The new agreement comes after months of deeply unpopular belt-tightening by Prime Minister Shehbaz Sharif’s government, which took power in April and has effectively eliminated fuel subsidies while also introducing new measures to broaden the tax base.